Trends in Tech Mergers and Acquisitions

Strategic Acquisitions Are Becoming the New R&D It seems like there is a quiet shift in M&A strategy across industries: acquisitions are increasingly less about eliminating competitors or gaining market share and more about accelerating innovation. Rather than spend years on internal R&D with uncertain outcomes and still do acquisitions for market share, companies are acquiring startups that have already solved key problems, built IP, or validated product-market fit. This way, they get to pick and choose what works, i.e de-risking innovation. The data supports this trend: *According to McKinsey & Company, over 50% of innovation-led growth now stems from M&A, not organic development. *CB Insights reports that in 2023, 61% of tech acquisitions were product or IP-driven, rather than focused on market consolidation. Examples are everywhere: *Google’s acquisition of DeepMind accelerated its leadership in AI well ahead of internal capabilities. *Pfizer acquired Biohaven for $11.6B to secure a migraine drug portfolio, complementing its post-COVID pipeline strategy. *Apple has acquired over 30 AI startups since 2017, building foundational capabilities behind closed doors. *Meta's acquisition of CTRL-labs provided R&D capabilities in neural interfaces years ahead of their in-house roadmap. For corporates, this approach reshapes the role of M&A: ->It becomes a front-end innovation strategy, not just a late-stage growth tool. ->It demands new competencies: startup scouting, technical diligence, post-acquisition integration. For startups, it means the best exits will come not just from scale, but from strategic depth; solving specific problems that corporates can’t or won’t solve internally. We're entering a phase where startups act as decentralized, external R&D labs; and acquisition is the new deployment model.

📈 𝐃𝐞𝐚𝐥𝐒𝐜𝐚𝐩𝐞 | 𝘐𝘯𝘤𝘳𝘦𝘢𝘴𝘦𝘥 𝘔&𝘈 𝘈𝘤𝘵𝘪𝘷𝘪𝘵𝘺 {𝘸𝘪𝘵𝘩 𝘳𝘦𝘭𝘦𝘷𝘢𝘯𝘤𝘦 𝘧𝘰𝘳 𝘦𝘮𝘦𝘳𝘨𝘪𝘯𝘨 𝘤𝘰𝘮𝘱𝘢𝘯𝘪𝘦𝘴} Disclosed startup M&A exceeded $100 billion in the first half of 2025, a 155% increase over the same period last year (Crunchbase). While a portion of that came from large-cap transactions such as Google’s $32 billion acquisition of Wiz, the broader trend is more important: 𝘚𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘤 𝘢𝘯𝘥 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘣𝘶𝘺𝘦𝘳𝘴 𝘢𝘳𝘦 𝘳𝘦-𝘦𝘯𝘨𝘢𝘨𝘪𝘯𝘨, 𝘢𝘯𝘥 𝘢𝘤𝘵𝘪𝘷𝘪𝘵𝘺 𝘪𝘴 𝘱𝘪𝘤𝘬𝘪𝘯𝘨 𝘶𝘱 𝘢𝘤𝘳𝘰𝘴𝘴 𝘴𝘦𝘤𝘵𝘰𝘳𝘴. ⟡ The market is open to smaller, targeted acquisitions. The majority of transactions involve growth-stage companies with strategic positioning rather than scale. Examples include Stripe’s acquisition of crypto wallet startup Privy and Zscaler’s pickup of Red Canary. These transactions were not billion-dollar outcomes, but they created strong alignment between acquirer and target. ⟡ Outcomes are being driven by fundamentals, not hype. Even in sectors like AI, many buyers are focused on core technology fit, talent, or distribution leverage. This rewards founders who have invested in real product traction, even if revenue is still early. ⟡ 𝘏𝘦𝘢𝘭𝘵𝘩𝘤𝘢𝘳𝘦 𝘤𝘰𝘯𝘵𝘪𝘯𝘶𝘦𝘴 𝘵𝘰 𝘴𝘦𝘦 𝘮𝘦𝘢𝘯𝘪𝘯𝘨𝘧𝘶𝘭 𝘪𝘯𝘵𝘦𝘳𝘦𝘴𝘵. One of the largest transactions of the year was Modernizing Medicine’s $5.3 billion recapitalization with Clearlake Capital. Buyers remain active in vertical software, clinical decision tools, and services tied to efficiency and reimbursement. → For many companies, M&A is becoming the next round. Four years after the 2021 funding peak, many venture-backed companies are now weighing strategic outcomes more seriously. Continued fundraising remains an option, but M&A has re-emerged as a credible and, in some cases, preferable path. ⁘ 𝘗𝘦𝘳𝘴𝘱𝘦𝘤𝘵𝘪𝘷𝘦: For emerging growth companies, the return of M&A provides an opportunity to align with the right strategic partner before market conditions shift again. These transactions do not require billion-dollar scale. A compelling narrative, focused execution, and thoughtful positioning can drive strong outcomes, even in the $25 to $150 million range. ❯ If you are thinking about capital strategy or starting to evaluate options, I would be glad to have a conversation. #MergersAndAcquisitions #StartupExit #StrategicCapital #HealthcareInnovation #VentureCapital #SierraPacificPartners

M&A is booming again. So what's new and what's changed from the last peak in 2021? Having been involved in dozens of M&A transactions as both buyer and seller in the public and private markets, here are my thoughts on the below chart (source: The Information). What's Changed: 1. 𝐂𝐨𝐫𝐞 𝐓𝐡𝐞𝐬𝐢𝐬 - Much of the current M&A is related to legacy companies shifting to become AI companies. Pivots are incredibly hard to do at scale (having been a finance exec at Adobe, I saw this firsthand), so M&A is the fastest way to shift into the AI era. Similarly, in the 2010s, much of the M&A activity was driven by legacy on-premise companies shifting to the cloud (i.e., Oracle / NetSuite). 2. 𝐂𝐫𝐞𝐚𝐭𝐢𝐯𝐞 𝐃𝐞𝐚𝐥 𝐒𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞𝐬 - Acquiring companies for talent used to be the smallest type of acquisition (called acqui-hires). Now we're seeing creative deal structures into the billions for talent alone. Top AI talent can materially impact outcomes in the current arms race, and that's reflected in the price. 3. 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐑𝐚𝐭𝐞𝐬 - In 2021 the fed funds rate was essentially zero, in contrast to ~4% for most of this year. When we were acquired in 2021 by Bill.com, they had recently raised a zero-coupon convertible bond to fund M&A. Debt isn't as attractive in the current market, so strong public company share prices and cash flow from operations are the main drivers. What's the Same: 1. 𝐁𝐮𝐲𝐢𝐧𝐠 𝐆𝐫𝐨𝐰𝐭𝐡 - There's a material valuation divergence in the public markets right now for high-growth vs. low-growth tech companies. This is historically consistent. When we were being acquired in 2021 for $625M, one of my main slides for the board presentation was an Enterprise Value / Revenue vs. Growth Rate regression chart for our acquirer vs. their peers, since the deal currency was 75% equity. Tech acquirers are consistently buying growth to move up and to the right on this regression line. 2. 𝐒𝐭𝐫𝐞𝐧𝐠𝐭𝐡 𝐢𝐧 𝐏𝐮𝐛𝐥𝐢𝐜 𝐌𝐚𝐫𝐤𝐞𝐭𝐬 → 𝐒𝐭𝐫𝐞𝐧𝐠𝐭𝐡 𝐢𝐧 𝐌&𝐀 - We consistently see that deal volume and prices go up when there is enthusiasm in the public markets. Will Campfire be on the M&A charts anytime soon? Only as the acquirer. Every time I meet with reporters (including two last week) to discuss Campfire, they ask if I'm open to being acquired. We receive plenty of acquisition interest, but there is zero appetite. We have a lot of work to do, but I'm incredibly focused on building a long-term, durable company that will enter the public markets.

What are the channel partner / technology advisor impacts from the Charter Communications and Cox Communications acquisition? Charter’s proposed $34.5 billion acquisition of Cox will create a potential duopoly for US cableco services, alongside Comcast. The deal will likely face strong regulatory scrutiny because it reduces the number of major multiple-system operators (MSOs) in the US to two dominant players. Concerns around market concentration (especially in underserved and rural markets), pricing, and reduced consumer choice. Any regulatory delays could stall integration and combination plans, leaving customers and partners in limbo. Upon completion, the Charter and Cox channel teams must help partners capitalize on the broader portfolio, which consists of Cox’s cable, Segra’s fiber, and RapidScale’s managed cloud solutions, by providing more enablement and support to foster cross- and upselling. This brings up a broader point on M&A in this sector. Look at the logos below comparing 2016 to 2024. As 20 major telco/cableco vendors have consolidated into 9, revenue has barely moved. Just following the tech industry's average growth, this should be a half-trillion dollar market by now. While profitability has improved, competitiveness and growth (the thesis of most M&A transactions) hasn't materialized for partners. According to the Harvard Business Review, over the past six years, nearly 80% of tech industry M&A transactions have been "scope deals," aimed at acquiring new capabilities, products, or markets, rather than "scale deals" focused on cost synergies. Resulting M&A success rates in the industry have moved from 70% failure to 70% success over this time period. These telco "scale" deals have not materially benefited the telco industry - or the partner ecosystem that surrounds it. We are watching recent moves by AT&T acquiring Lumen Technologies' mass market business, Verizon acquiring Frontier Internet, and T-Mobile acquiring US Cellular-Answer Wireless and measuring any multiplication effect for partner services. Ask yourself this... What if the hundreds of billions spent on "scale" acquisitions over the past 8 years was spent on acquiring cybersecurity vendors instead? This would have created compounded double-digit growth and tens of billions of accretive revenue for shareholders (at a much higher valuation).

After facilitating 250+ tech deals across cycles, I see the M&A playbook in 2026 will require: Strategic engineering. Founders shouldn't: - prep for it when an opportunity comes - then chase every possible buyer - only to settle on weak terms We've seen Google, Salesforce, Verizon and others acquire companies that, on paper, did not “fit” the classic criteria: too small, too niche, too early... But those transactions happened because they were strategically engineered years before. In this market, that usually means a combination of: - A capital-efficient, founder-led company with clean economics - A sharp strategic narrative that solves a specific gap in the acquirer’s product or market map - Direct relationships with product, strategy, and business unit leaders who feel the pain you solve When those three line up, deals that should not happen on a spreadsheet suddenly become obvious inside the boardroom. You can use the set of tools and frameworks below to prepare for this as early as possible. But the core idea is simple: If you build the right business, articulate why you matter to specific acquirers, and stay close to the people shaping their roadmaps, you don't have to “sell” your company. You create the conditions for the right buyer to conclude that acquiring you is the logical next step. i5growth / i5invest: Investment Fund, global tech M&A arm, team of 100+, offices in San Francisco, Vienna, Madrid, Berlin, Frankfurt; 200+ exits & strategic partnerships with tech leaders such as Google, Microsoft, Salesforce, Qualcomm, Samsung, Nvidia, Naspers, NBC, … #strategy #startups #growth

In 2023, CB Insights set the benchmark for tech M&A: 1.6m$ per employee in +100m$ deals.   By 2025, AI has rewritten the rulebook: - Median: +9m$ per employee - Selective R&D carve-outs: up to +80m$ per employee   The price per FTE hasn’t just climbed, it has sextupled.   What’s driving this shift? Rising revenue synergies, acute talent scarcity, soaring compute costs, and the strategic premium of keeping teams out of competitors’ hands have pushed valuations into a new equilibrium.   I analyzed recent AI transactions and revisited acquisition theory to explain how deals are priced, and why today’s dynamics look nothing like 2023.   🔗 Read more in my latest Substack: https://lnkd.in/e3m5fZvf

2025 Tech M&A (>$1B deals): 94% scope vs 6% scale Bain’s Q1–Q3 2025 data shows that most big tech deals were aimed at adding capabilities or entering adjacent markets (scope), not consolidating competitors (scale). Across all industries: 60% scope/capability; 40% scale When 94% of tech’s big deals are scope, It usually means most acquirers in this space are buying “missing pieces”: – a product that extends their platform into a nearby workflow – a team + product that speeds up a clear roadmap milestone – a capability they can’t build fast enough (AI, security, compliance, data) In practice, acquirers sanity-check: Capability fit (does it strengthen the core product?) Revenue path (who buys it, and what gets sold first?) Talent retention (do the key builders stay post-close?) Integration effort (product/data/security work, and timeline) If this pattern holds into 2026, Sellers should position their company like this: Talk less about “we’re growing.” Talk more about “we complete your product and expand your market.” Make the integration and cross-sell path obvious. Considering M&A? Feel free to reach out: https://t2m.io/i5invest 𝐖𝐡𝐨 𝐢𝐬 i5invest: We are a corporate development firm with access to 150K+ top decision-makers in Strategy, Business Development, and M&A. We provide innovative tech founders with insights, expertise, and access to our network to take their companies to the next level. #growth #tech #merger #acquisition #startups

My latest PitchBook analyst note, US VC-Backed M&A Outlook, has gone live. Key takeaways ➡️ Large M&A continues to be rare because of elevated interest rates, uncertain economic growth, increased regulatory scrutiny, and stock market volatility. Public companies have significantly pulled back from large acquisitions, with the number of active public acquirers dropping from a peak of 1,423 in 2021 to 815 in 2024. ➡️ While big-ticket deals remain limited, smaller acquisitions are experiencing relative growth. A confluence of factors—lower startup valuations, need for liquidity, and prolonged funding drought—have created favorable conditions for smaller-scale M&A. These deals are poised to maintain or slightly grow in the coming quarters. ➡️ With the number of private companies rising sharply and public market exit channels severely limited, M&A has become a critical path for exits. The median time since last funding round hit a record 2.4 years in Q1 2025, reflecting mounting pressure for liquidity. Founders and GPs are increasingly turning to M&A as a quicker, more viable liquidity solution compared to IPOs. ➡️ Antitrust concerns continue to be a hurdle, especially for Big Tech, under the Trump administration. Despite this, large deals such as Google’s $32 billion offer for Wiz signal hope that high-profile acquisitions are still possible. ➡️ Sectoral trends show divergence in M&A resilience. Software remains the dominant sector, comprising more than 40% of deal volume since 2015 and peaking at 51.2% in Q1 2025. Areas such as digital health and supply chain tech are more insulated from trade policy risks. ➡️ Buyouts, although traditionally a smaller share of VC exits, now outpace public listings. Interest is growing among PE firms seeking bolt-ons, especially in software, healthcare services, and commercial products. Check out the full note via link in comments. 🔗

Best year for startup M&A ever? 2025 is shaping up to be an exciting time for startup acquisitions. Across company sizes, the first half of 2025 came in hot with deal activity. If the trend holds through H2, it's likely that we'll see more Carta startups acquired this year than ever before. Data splits acquisitions by the amount of cash raised by the acquired company. So a company that had raised $8M (likely a Seed / Series A business) would fall into the orange bars below. 𝗗𝗮𝘁𝗮 𝗧𝗵𝗿𝗼𝘂𝗴𝗵 𝗤𝟮 𝟮𝟬𝟮𝟱 • 126 companies acquired after raising $1M-$10M • 100 acquired after raising $10M-$50M • 48 acquired after raising $50M+ 𝗪𝗵𝗼 𝗔𝗰𝗾𝘂𝗶𝗿𝗲𝘀 𝗧𝗵𝗲𝘀𝗲 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀? • PE shops (lower to middle market) • Big Tech • Other startups Of course it should be stated that just because a company has an acquisition does NOT mean that the founders and employees made a bunch of money. In many cases, it's likely that the investor preference ate into the final sale price and common stockholders came away with relatively little. This is anecdotal (not my favorite type of data), but it does sound like deals in 2025 are a bit more lucrative than those in 2023 and 2024. Startups have gotten their books in order, cut capital spend, and made many other changes to increase their attractiveness to potential buyers. Anyway, this is all good for the ecosystem at large. More M&A = hopefully more dollars back to funds = more DPI for LPs = more venture. And less need for these icky Windsurf acqui-licensing-blahs. Good luck on your future deals, founders! #startups #acquisitions #M&A #founders  

Private equity (PE) funds are acquiring major stakes in tech firms operating in areas like digital engineering and healthcare, Beena Parmar reports for The Economic Times. Technology was the top sector for PE/VC investments in Q1 2025, with $3.1 billion invested across 41 deals — a 265% year-on-year value increase, according to IVCA-EY data. While Kedaara Capital in January invested $350 million in data, analytics, and AI solutions firm Impetus Technologies, H.I.G Capital acquired Converge Technology Solutions for C$1.3 billion earlier this year. Agiltas PE also purchased Tietoevry Tech Services for €300 million. Around 70-80 new buyers have entered the market, says Shobhit Jain, Head of Enterprise, Technology, and Services at Avendus Capital. He adds that there is an increasing interest in large deals, because sub-segments like cloud and analytics have seen a 20-40% growth, even in large-scale businesses. What's driving this surge in mergers and acquisitions (M&As)? The fact that in today's tech landscape, a purely organic growth model doesn't result in significant, double-digit growth, adds the Economic Times report, citing analysts. Gaurav Vasu, founder and CEO of UnearthInsight, adds that there has been a 200% growth in M&A investments by PE-backed IT services firms. In 2024, PE-VC investments rebounded 9% year-on-year to touch almost $43 billion, according to Bain & Company and IVCA's India Private Equity Report 2025. While consumer tech funding saw a nearly 2X increase during the period, healthcare deal volumes also jumped by almost 80%, driven in part by large medtech transactions, according to the report. What trends will shape India's tech M&As in 2025? Share your take in the comments. Source: The Economic Times: https://lnkd.in/gh2gkB79 Bain & Company- Indian Venture and Alternate Capital Association (IVCA): https://lnkd.in/dXAhvwaq IVCA EY: https://lnkd.in/g7M5UwkZ ✍ : Isha Chitnis 📸 : Getty Images #PrivateEquity #VentureCapital #TechInvestments