Increase in M&A Deals for Venture Capital-backed Startups in 2024

In recent years, venture capitalists have been focusing on exits and liquidity to ensure that funds flow back to their limited partners. While 2024 did not bring the desired surge in M&A activity that many had hoped for, there was a glimmer of hope. Crunchbase data shows that deal activity actually increased by 7% compared to 2023, with the fourth quarter being the strongest for M&A involving VC-backed startups in seven quarters.

The fourth quarter of 2024 recorded 537 M&A deals involving VC-backed startups, which was a significant 46% increase from the same period in 2023 and a 9% jump from the third quarter of 2024. Throughout 2024, a total of 1,975 M&A deals were completed, showing an increase from the 1,842 deals announced in 2023. While the 2024 figure is lower than the peak of the VC market in 2021-22, it is nearly identical to the number of deals completed in 2020.

Some of the biggest M&A deals of 2024 occurred in the final quarter, including insurance giant Gallagher’s acquisition of insurance firm Assured Partners for $13.5 billion and BlackRock’s purchase of HPS Investment Partners for $12 billion. Financial buyers like Apollo and Hg also engaged in significant deals, and strategic buyers such as Merck and Elevance Health demonstrated a willingness to engage in deal-making activities.

While the global M&A market for VC-backed startups experienced an increase, the domestic market in the US saw a more substantial boost. The number of deals consummated in the US market reached 289 in the last quarter of 2024, marking a 56% increase from the previous quarter. Overall, 2024 recorded 1,032 M&A deals involving VC-backed startups, showing a 30% uptick from the previous year when the market had dried up.

Artificial intelligence, a prominent technology sector, played a significant role in driving M&A activity in 2024. The number of AI-related startups that were acquired by VC-backed entities increased by 39% compared to 2023. However, the total number of deals was slightly lower than those announced in 2022. Major deals in the AI space included Mastercard’s acquisition of Recorded Future for $2.65 billion and CCC Intelligent Solutions’ purchase of EvolutionIQ for $730 million.

Looking ahead to 2025, there is optimism that changes in the federal government could jumpstart the M&A market. Potential regulatory changes and a more “risk-on” approach from corporate and private equity investors could fuel further deal-making activity. However, challenges such as regulatory obstacles and concerns about inflated valuations from previous years may still impact the M&A landscape. Despite these hurdles, the slight increase in M&A activity in 2024 is seen as a positive sign for the venture capital industry, as it addresses the critical issue of distributed to paid-in capital (DPI) and liquidity in the market.