I’d like to see every startup I invest in get to IPO. But realistically, an acquisition is the best case outcome for most.
If Trump wins in November, we could see a massive wave of M&A in tech. This M&A flood will put a lot of money in investors’ pockets, whatever their political leanings may be.
Pent-Up Demand
Since Biden became president, tech companies have had a pretty hard time buying anything.
The hardline FTC chair, Lina Khan, has blocked most acquisitions in tech. The FTC was even against Amazon buying the Roomba vacuum company!
This means that for almost 4 years, tech companies haven’t been able to buy the products and teams they want. If a friendlier administration takes office in January, there will be enormous pent-up demand for M&A.
Big companies like Uber are growing revenue 20% a year. Meanwhile, headcount has been basically flat since 2021.
Growing revenue and flat headcount means tech giants are piling up cash. Big tech wants to use that cash to grow their businesses.
An easy way to do that is to buy some startups! Uber could buy Gopuff and offer 15 minute delivery to Uber’s 150 million users overnight.
Praying for Exits
It’s really hard for VC’s to raise money right now. I’ve heard some say it’s the worst since the dot com crash in 2000.
With few IPO’s and M&A blocked by the government, there have been very few exits since 2021. This means LP’s just don’t have the money to invest in the next venture fund.
If a friendly administration comes in and M&A starts cooking, that picture changes considerably.
Once we see a couple big M&A transactions push through, LP’s will have more cash to play with. Many will re-invest that in another venture fund, hoping for more juicy returns.
The European Gadflies
Ahh, the Europeans. Love the croissants, don’t love the politics.
The one problem with this rosy M&A story is Europe. Regulators in the EU and UK are rabidly anti-tech.
They helped block the Adobe-Figma deal even though Figma doesn’t compete with Adobe. They also had a hand in squashing the Amazon-iRobot acquisition.
You may see some tech companies pull out of the UK entirely to avoid regulation. For most companies, it’s not a significant market anyway.
The EU is a tougher cookie. But acquirers may be able to spin off certain units or make commitments to share platform access with competitors. This worked for Google’s acquisition of Fitbit in 2020.
Wrap-Up
For America’s system of entrepreneurship to work, people have to make a return on their investment. For the last 3 years, that’s been nigh impossible.
If Trump wins, he’ll get rid of Lina Khan and M&A will get much easier. Cash-rich tech giants will go on a shopping spree.
And hey, I’m willing to part with my shares — for a reasonable price.😁
What do you think the future holds for M&A?
More on tech:
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