For the past few years, exits and liquidity have been the predominant topics for enterprise capitalists eager to get a reimbursement to their limited partners.
While last yr wasn’t the cascade of mergers and acquisitions that many expected (and the IPO plan was actually never unfrozen), it did provide some hope. Deal volume actually increased 7% in comparison with 2023, with the fourth quarter being the strongest quarter for M&A involving VC-backed startups in seven quarters, in accordance with Crunchbase data.
There were 537 M&A deals involving VC-backed startups in the fourth quarter, an increase of 46% in comparison with the fourth quarter of 2023 and 9% in comparison with the third quarter of last yr, in accordance with Crunchbase data.
A complete of 1,975 M&A deals were accomplished in 2024, up from the 1,842 announced in 2023. While the 2024 number is lower in comparison with the VC market peak in 2021-2022, it is actually almost similar with 1974 transactions in 2020 .
Big money
The last quarter of 2024 also actually saw some of the biggest deals of the yr – even if they probably went unnoticed by most individuals.
In December, an insurance giant Gallagher agreed to purchase an insurance company Reliable partners for $13.5 billion, while also being an investment giant CzarnyRock bought HPS Investment Partners – an investment company focused on non-investment grade loans – for $12 billion.
BlackRock was not alone. Other financial buyers akin to Apollo AND Hg last yr also accomplished large transactions, while strategic buyers, including Merck AND Facade Health it also showed openness to concluding transactions.
Demands on the American market
The domestic M&A market for VC-backed startups has seen greater growth than the global market.
After reaching a low in Q4 2023, when only 185 deals were accomplished, the variety of deals rose to 289 in the last quarter of last yr, in accordance with Crunchbase data — 56% pop. The fourth quarter also saw a smaller – but still significant – jump of 12% in comparison with the third quarter.
Overall, 1,032 M&A deals were announced for VC-backed startups in 2024, up 30% from 2023, which saw only 856 deals as the M&A market dried up.
AI pressure
Of course, given these numbers, one could logically conclude that the predominant driving force was artificial intelligence – the latest technology darling.
This is at least partially true. While M&A activity has actually moderated somewhat over the last few quarters, the yr ended with a total of 268 VC-backed AI startups being acquired, in accordance with Crunchbase data. This figure represents an increase of 39% from the 193 deals in 2023, but is barely down from the 282 deals announced in 2022.
Last yr’s biggest deals in the AI space were for the giant’s bank cards MasterCard agreeing to buy a threat intelligence company The future is saved for $2.65 billion in September and Intelligent CCC solutions buying EvolutionIQ – an artificial intelligence company that gives claims consulting solutions for insurance firms – for $730 million late last yr.
2025?
Predicting the M&A market could be a idiot’s errand. Many people believed that 2024 would see a decisive return to concluding contracts.
However, many are optimistic that changes in the federal government will usher in an M&A market. These changes could include: Federal Trade Commission AND US Department of Justiceas the recent administration may seek to eliminate regulatory hurdles.
Many are now seeing greater corporate and private equity interest in the market as dealmakers take a riskier approach.
However, inequalities should occur. President-elect Donald TrumpThe nomination of Gail Slater – a frequent critic of massive tech firms – to guide the Justice Department’s antitrust efforts has caused some consternation in Silicon Valley.
There is also the undeniable fact that many startups are still reeling from the valuation cuts seen after the market overheated in 2021 and 2022. If startups fail to attain these higher numbers, the M&A market could remain sluggish.
It’s necessary to do not forget that even last yr’s growth doesn’t suggest buyers are buying at high valuations – many deals involving startups likely only closed after the goal company accepted a figure that was significantly different from their expectations from just two years ago.
Nevertheless, many VCs will see the slight jump in M&A activity last yr as a huge positive, as DPI – distributed among paid-in capital, or capital paid into LPs of funds after the exits of those funds’ portfolio firms – stays a major concern in the enterprise world.