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April 26, 2023 | Tom Ballard

Acquisition of VC-backed companies hits decade low

Many investors predicted a wave of mergers and acquisitions activity in early 2023 amid dramatically lower valuations and a closed IPO window, but that has not happened yet.

In the first quarter of 2023, acquisitions of venture capital (VC)-backed companies fell to the lowest quarterly level in a decade, according to the latest PitchBook-NVCA Venture Monitor.

As Marina Temkin wrote in this recent article for PitchBook, “Last year, many investors predicted a wave of M&A activity in early 2023 amid dramatically lower valuations and a closed IPO (initial public offering) window. But so far, M&A dealmaking waters have been calmer than ever thanks to an unpredictable course of interest rates, geopolitical instability, and a renewed focus on profitability for large tech companies.”

She added that venture capitalists in 2022 began to encourage their weaker portfolio companies to look for a “soft landing” by selling to a corporate acquirer at a discount. But since M&A processes take a long time, investors anticipated many of those efforts wouldn’t come to fruition until early 2023. While there were conversations between large tech companies and start-ups in the fall, those discussions have not led to an uptick in deals so far.

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