Venture Capitalist at Theory

About / Categories / Subscribe / Twitter

2 minute read / Jan 16, 2023 /

The Most Acquisitive Acquihirers in Software

“The Startup M&A Market Fell 94% Year over Year - But One Segment Thrives”, a post from last week, elicited the same question from many readers.

Just who are the most active acquirers for smaller takeouts?

To answer the question. I reviewed the roughly 560 US software acquisitions under $400m since January 1, 2020.

“Chart showing the most active software acquirers in 2020 by count”

ServiceNow tops the list with 5 acquisitions. Alphabet ingested 4 companies. So did Medallia. Most of the other top 25 buyers, including Splunk, Apple, & VMWare, closed the period with 3 M&A events, about one annually.

“Chart showing the most active software acquirers of VC backed companies in 2022 by dollars”

Examining the data by dollars reveals Motorola spent $800m, more than double the average across this group. Alphabet bought $400m of startups & Apple $375m. prefers small acquisitions: 4 purchases during the period, totalling less than $12m in value.

“chart showing the average value per employee of small software acquisitions in the US for venture backed startups”

How does willingness to pay vary by acquirer? CrowdStrike, Alphabet, & Motorola have paid about $3m per employee, roughly twice the median.

Percentile M&A Value per Employee, $m
25th 0.7
50th 1.4
75th 2.2

The rule of thumb has hovered at $1m per person in the past. Perhaps inflation seeped into this market just as much as groceries & gas.

Despite the macroeconomic challenges, the M&A market has persisted at roughly constant pace.

453 distinct acquirers each spent $50m annually on smaller acquisitions over the last three years, providing on $10-20b of liquidity to founders, employees, & investors each year.

Year Number of Acquisitions Average Value, $m
2020 155 77
2021 280 83
2022 124 78

The acquihire / small value part of the acquisition market remains an essential component of Startupland’s model. Small acquisitions provide liquidity, help incumbents staff new initiatives, & continue the forward progress for the ecosystem.

Read More:

Rabbits on Firetrucks : Generating Images for B2B Blog Posts Using AI