Startups: M&A Activity Nosedives Amidst Surge in Equity Markets
Deal News | Feb 12, 2025 | EIN
The article discusses a significant decline in mergers and acquisitions (M&A) involving startups in 2024, citing a 42% year-on-year decrease and a 70% drop since 2022. This trend parallels a surge in public capital markets, which allows companies to list more easily, thus reducing the need for M&As as a secondary sales or buyout option. Bharat Anand, a Senior Partner at Khaitan & Co, explains that the easy availability of public capital has diverted potential M&A deals to public listings. The article elaborates on how companies are leveraging IPOs as exit strategies, with 38 startups going public in the previous year compared to 21 in 2023. While private funding has seen a slight rise, it remains below previous levels. The narrative further explores the role of M&As as growth strategies for private equity and venture capital-backed companies, mentioning past notable deals such as Zomato's acquisition of Paytm Insider. As market uncertainties persist, the article anticipates a possible recalibration in M&A valuations and a gradual uptick in activities aligned with new market norms.
Sectors
- Mergers and Acquisitions
- Capital Markets
- Venture Capital and Private Equity
Geography
- India – The article centers around the Indian startup ecosystem, M&A environment, and capital markets.
- Global – Global economic factors and investor behaviors impacting the Indian market are discussed, hence adding a global dimension.
Industry
- Mergers and Acquisitions – The article focuses on the mergers and acquisitions activity in the startup sector.
- Capital Markets – The role of public capital and market trends are significant factors affecting startup M&A dynamics discussed in the article.
- Venture Capital and Private Equity – Insights into how venture capital and private equity firms strategize M&A as a growth mechanism are provided.
Financials
- 38 – Number of startup IPOs in the previous year, highlighting the accessibility of capital markets.
- 21 – Number of startup IPOs in 2023, illustrating a comparison with the subsequent year's IPOs.
- Rs 500-1000 crore – Revenue range for companies now able to list in public markets, reducing the need for M&A.
Participants
| Name | Role | Type | Description |
|---|---|---|---|
| Khaitan & Co | Advisor (Legal) | Companies | Legal advisory firm providing analysis on M&A activities and capital market trends. |
| Bharat Anand | Senior Partner | People | Bharat Anand provides insights into M&A dynamics and capital market conditions. |
| Zomato | Acquirer | Companies | Zomato acquired Paytm Insider to expand its entertainment ticketing business. |
| OYO | Acquirer | Companies | OYO acquired Paris-based company checkmyguest to enhance its offerings in premium rental homes. |
| Fullerton India | Acquirer | Companies | Fullerton India gained a controlling stake in lendingkart, a fintech company. |
| Freshworks | Acquirer | Companies | Freshworks acquired US-based Device42 in a recent M&A deal. |
| Ashish Bagadia | Partner | People | Ashish Bagadia provides insights on M&A as an exit strategy and valuation expectations. |
| BDO India | Advisor (Corporate Finance) | Companies | Corporate finance and investment banking firm providing analysis on the Indian M&A landscape. |