TLDR:
- Deal-making involving VC-backed startups picked up slightly in the first quarter of 2024.
- The slow market is attributed to high valuations, regulatory challenges, and cautious buyers waiting for better prices.
Many in the venture capital and M&A worlds were hopeful for a more robust deal-making environment in 2024 after a slow 2023. Valuations of venture-backed startups have started to come down, the IPO market has shown some signs of reopening, and buyers are flush with cash. However, the first quarter of 2024 only saw a slight uptick in deal-making, with 413 deals completed through March, which was a 20% increase from the previous quarter.
The quarter did not witness any deals over $1.8 billion, with the top deals including Cox Enterprises acquiring OpenGov for $1.8 billion, Francisco Partners acquiring Jama Software for $1.2 billion, and Novo Nordisk agreeing to buy Cardior Pharmaceuticals for approximately $1.1 billion. Despite the optimism, high valuations for quality companies and regulatory issues have kept the market sluggish, with many buyers waiting on the sidelines for better prices.
Strategic aspects may play a role in M&A activity, as companies like Nvidia have been actively acquiring AI-related startups to enhance their offerings. Cash-rich buyers, including tech giants like Microsoft and Google, are expected to drive deal-making for VC-backed startups, particularly in the AI space. However, concerns about inflation and volatility in tech stocks could still pose challenges for the M&A market.
Despite these challenges, many startup investors are seeking liquidity after a slow period in deal-making, and both strategic buyers and private equity firms are prepared to expand their portfolios. The slight uptick in deal-making in Q1 of 2024 may just be the beginning of a more active M&A market ahead.
