Is the VC M&A Market Back?

In a recent post “The 2024 Tech IPO Pipeline” (https://fabricaventures.com/the-2024-tech-ipo-pipeline/), we delved into the likelihood of the tech IPO window opening this year.

Now it is time to look at the perspectives of the tech M&A exit window in 2024.

According to CB Insights, US M&A activity involving VC-backed companies dipped to just over 1,600 deals in 2023. While that may not seem low, it pales in comparison to the nearly 2,500 deals completed in 2022 and the more than 3,100 finalized in 2021.

Within this context, the number of acquisitions by Big Techs (Amazon, Apple, Google, Microsoft, Meta, Nvidia) almost halted in 2023, dropping from 33 in 2022 to 7 in 2023.

There were a few reasons for the tech M&A slowdown in 2023:

1) Antitrust scrutiny (marked by lawsuits and delayed closings), which recently blocked the Adobe/Figma US$20B deal, put pressure on the mega market cap acquirers

2) Significant stock market volatility making valuing acquisitions more difficult

3) Higher costs of debt, mainly impacting PE funds leverage ability

4) Lack of sales predictability, because of elongated sales cycle, focused teams on internal efficiency (now improved by the use of AI), rather than outward expansion

Conclusion

The antitrust pressure shall remain in 2024, but the other factors may dissipate, suggesting that tech M&A should grow in a meaningful way in 2024.

Promising for the 2024 VC landscape!