M&A Startup Deal Activity Dips Slightly In Q3

Even as more venture capitalists search for liquidity to show their limited partners real returns, M&A dealmaking involving startups dipped slightly quarter to quarter in Q3.

In Q3, there were 479 M&A deals globally for VC-backed startups, per Crunchbase data. That’s a very small drop from the 500 deals consummated in Q2 — but it does break the two-quarter streak of growing M&A startup deals.

However, the number is a small uptick from Q3 of last year, which saw 430 deals involving startups completed globally.

It is also noteworthy that the Q3 numbers put this year ahead of last year’s startup-related M&A pace — when dealmaking significantly slowed.

On the other hand, Q3’s numbers represent a 17% drop from the same quarter in 2022 — when the M&A market was still very robust.

Big deals

The Q3 numbers do feature some noteworthy large deals by both tech and nontech buyers.

They include credit card giant Mastercard agreeing to buy threat intelligence company Recorded Future for $2.65 billion and Salesforce 1 buying data management tools developer Own Company for around $1.9 billion.

While the M&A numbers overall for Q3 don’t point to a clear rebound in dealmaking, they may at least partially ease some VCs concerns over the slow pace of M&A in what many think is an over-regulated environment — as some VCs say that is one of their top industry concerns when it comes to the election.

AI’s influence

As with anything tech-related, one also has to consider AI’s effect on the M&A market.

The numbers for dealmaking involving AI-related startups pretty much mirrored the overall M&A number, at least as far as the past few quarters are concerned, Crunchbase data shows.

There were 70 deals announced involving AI-related startups last quarter, per Crunchbase data. That, again, is down just a smidge from the 75 deals in Q2, but it is up 46% from the same quarter last year.

The percentage of deals involving AI also jumped slightly year to year. Only 11% of M&A startup deals globally involved AI a year ago, but in the past two quarters that has jumped to 15% — not surprisingly as everything in tech has become laser-focused on AI and its potential uses.

Some of the more notable deals last quarter involving AI-related startups were AMD buying Finland-based AI lab Silo.AI for $665 million, and Applied Systems acquiring New York-based AI commercial insurance platform Planck for $300 million.

Looking ahead

While it is difficult to predict the market, it does seem unlikely Q4 will provide a big bounceback for startup M&A.

First, the U.S. elections may have cast a slight chill on dealmaking until folks know the outcome — and that outcome is unlikely to have any great impact on something like regulation in Q4 and may not really have any effect at all.

Second, Q4 is usually slower as the end-of-year holidays can affect the market.

Nevertheless, VC-backed startups should see a better M&A year than last — even if it is not as good as VCs were hoping.

Related Crunchbase Pro lists:

• Global Venture-Backed M&A
• Global Venture-Backed Artificial Intelligence M&A

Further reading:

• Mastercard Buys Insight Partners’ Recorded Future For $2.65B
• The US Presidential Election Will Affect Venture Investing. How Much Is The Question

Illustration: Dom Guzman