The Most Acquisitive Acquihirers in Software
Tomasz TunguzVenture Capitalist If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. The Most Acquisitive Acquihirers in Software
“The Startup M&A Market Fell 94% Year over Year - But One Segment Thrives”, a post from last week, elicited the same question from many readers. Just who are the most active acquirers for smaller takeouts? To answer the question. I reviewed the roughly 560 US software acquisitions under $400m since January 1, 2020. ServiceNow tops the list with 5 acquisitions. Alphabet ingested 4 companies. So did Medallia. Most of the other top 25 buyers, including Splunk, Apple, & VMWare, closed the period with 3 M&A events, about one annually. Examining the data by dollars reveals Motorola spent $800m, more than double the average across this group. Alphabet bought $400m of startups & Apple $375m. Recruiter.com prefers small acquisitions: 4 purchases during the period, totalling less than $12m in value. How does willingness to pay vary by acquirer? CrowdStrike, Alphabet, & Motorola have paid about $3m per employee, roughly twice the median.
The rule of thumb has hovered at $1m per person in the past. Perhaps inflation seeped into this market just as much as groceries & gas. Despite the macroeconomic challenges, the M&A market has persisted at roughly constant pace. 453 distinct acquirers each spent $50m annually on smaller acquisitions over the last three years, providing on $10-20b of liquidity to founders, employees, & investors each year.
The acquihire / small value part of the acquisition market remains an essential component of Startupland’s model. Small acquisitions provide liquidity, help incumbents staff new initiatives, & continue the forward progress for the ecosystem. |
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