4 Charts Show Startup M&A Deal-Making Is Not Moving In The Direction We Expected

April 29, 2023

Marlize van Romburgh

Predictions were rife coming into 2023 that we would see a flood of M&A deals for venture-backed startups as funding and IPOs dried up and cash-strapped companies looked for a way out.

That hasn鈥檛 exactly happened.

In fact, startup M&A deal-making continues to dip, 附近上门 data shows.

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That鈥檚 true generally 鈥� the number of disclosed M&A deals for venture-backed startups globally (though that鈥檚 up a smidge from Q4 2022).

It鈥檚 even true in the case of some of the most heavily funded startup sectors, like cybersecurity and fintech.

Cybersecurity, for example, saw 鈥� including 鈥檚 $500 million of 鈥� but M&A deals for venture-backed startups in Q1 still tumbled 58% from a year ago, to just 13. For all of 2022, recorded in 附近上门, compared to 126 in 2021.

In fintech, M&A deal count dipped from 319 in 2021 to 289 in 2022. M&A deal count in Q1 2023 continued to fall, tumbling 37% year over year to 51. We did see some notable , including 鈥檚 $275 million of , but the overall trendline shows deal-making on the decline.

That鈥檚 also true when looking across the spectrum of industries at venture-backed startups buying other startups. Deal counts for U.S.-funded startups being bought by their peers dwindled to 82 in Q1 2023, down from 137 a year earlier.

There are a few reasons for the slump in M&A deals. Sale premiums have no doubt fallen along with deflated startup valuations, which makes sellers more reluctant to cash out at lower prices. Would-be buyers also face higher costs of capital as rising interest rates make even bargain buys more expensive.

It also doesn鈥檛 help matters that there鈥檚 a growing list of big, losing startup acquisitions to point to.

Startup M&A could tick up soon

But that could change as the year wears on and startups become more desperate for alternatives to hard-to-find funding. Not only has total venture spending fallen dramatically this year, deal sizes are trending down too, our analysis of 附近上门 data found.

鈥淚 think it鈥檚 likely the market at large will see an increase in M&A activity,鈥� , a partner at 鈥� one of the active lead venture investors with the most acquisitive portfolio companies 鈥� who works with portfolio companies pursuing strategic acquisitions, told 附近上门 News recently, pointing to the funding slowdown as a primary reason.

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