Cash-rich companies like Nvidia, Cisco, Apple, and Microsoft are expected to use their balance sheets to broker deals for VC-backed startups, particularly in the AI space. Private equity also has substantial dry powder, as evidenced by Thoma Bravo’s recent acquisition of cybersecurity firm Darktrace for $5.32 billion in cash. Despite potential challenges such as inflation and volatility in tech stocks, many startup investors are seeking liquidity, indicating that the slight increase in deal-making in Q1 could be the beginning of a trend.
Key takeaways:
- The first quarter of 2024 saw a slight increase in M&A deals with 413 deals being completed, a 20% increase from Q4 2023, according to Crunchbase data.
- Regulatory complications and concerns about the antitrust regulatory process are causing delays in deal consummation, increasing the value of deals and discouraging potential suitors.
- Despite the sluggish market, there is optimism for the M&A market with Microsoft-backed data security firm Rubrik testing the IPO waters and insiders being 'cautiously optimistic' about the rejuvenation of the market for new public companies.
- Strategic buyers like Nvidia, Cisco, Apple, and Microsoft, as well as private equity firms, are flush with cash and may use this to broker deals for VC-backed startups, especially in the AI or adjacent spaces.