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2 minute read / Dec 20, 2023 /

Why Startup M&A in 2024 Will Rebound

Earlier this week, Alteryx announced its intention to go private for $4.4b. It’s the 10th in 2023.

Company Valuation
Qualtrics 12.5
Coupa 8
New Relic 6.5
Cvent 4.6
KnowBe4 4.6
Alteryx 4.4
EngageSmart 4.0
Software AG 2.4
Sumo Logic 1.7
Momentive 1.5
Total 50.2

In December of last year, I wrote :

Private equity acquires 10% of the 70+ publicly traded software companies by the end of the year. With hundreds of billions of dry powder, plenty of healthy cash flows generated by SaaS publics, & the leverage of the inevitable shareholder lawsuit if a board rebuffs the 30% premium of a tender offer, private equity becomes the dominant M&A option in dollar terms for 2023.

With 10 companies taken private, the market exceeded my prediction.

Meanwhile, venture-backed software M&A in the US, Canada, & Europe during 2023 totaled about $10b, about 20% of take-privates.

The top two companies account for about one-third of that amount: WideOrbit (ad management for TV & radio) at $1.6b & Mosaic (machine learning platform) at $1.3b.

Strategic M&A was limited in 2023 for a few reasons. First, anti-trust scrutiny, which blocked the Adobe/Figma transaction, has pressured five trillion-dollar-market-cap-acquirers.

Second, the significant stock market volatility makes valuing acquisitions difficult.

Third, the lack of sales predictability in the first two quarters of the year, because of pipeline shocks, focused teams on internal stability, rather than outward expansion.

The anti-trust pressure will remain in 2023, but the other two factors should dissipate, suggesting strategic M&A should grow meaningfully in 2024. In addition, the decreasing costs of debt as the Fed cuts rates will continue to fuel private equity M&A.

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