There used to be a time when the acquisition of tech companies was in trend. Techpreneurs, use to start their venture with the motive to sell it for million or billion dollars. But today story is altogether different. As per the report by TechCrunch, just 17 ‘well-funded’ private technology companies were acquired for more than $100 million so far in the year 2017. If we compare this figures with last year, the same number were sold with valuations of $500 million or more.
If we look at the deals, by the end of July 2017, there’s been only one big ‘unicorn’ ($1 billion valuations) deal that is Cisco’s $3.7 billion purchase of AppDynamics. Whereas in 2016 there were six such deals.
This number clearly states the slowdown in the tech acquisition. But what’s the reason behind it? Is it lack of innovation? or Are companies losing their interest in acquiring a startup with huge valuation? Money is not the reason behind it. As per the TechCrunch reports, more than 450 companies in many sectors has raised more than $20 million or more this year with 94 companies able to raise more than $100 million which is more than a third over last year.
Commenting on the development, David Blumberg, Managing Partner, Blumberg Capital told TechCrunch. “ It could be happenstance. Or some sectors may be running into resistance due to high multiples,”
So what’s the reason behind the slowdown? There could several factors which are affecting this slowdown. Some global companies are waiting to see where tax reform goes in Washington, where there’s talk of a potentially dramatic reduction in tax rates on cash repatriated back to the United States.
Whereas, many venture-backed companies are choosing to stay private for as long as possible and avoid ‘sub-optimal’ offers and return more to their original backers who hold shares.
Now time will only tell what future holds for these tech companies? Will acquisition rate increase or it will keep on going down?