Alex McCracken, managing director at Silicon Valley Bank’s UK branch, provided an overview of mergers and acquisitions (M&A) activity, exit routes and emerging trends across the market at the GCV Digital Forum 2021.
As McCracken underlined, activity has been buoyant in the last year, often driven by an increasing presence of corporate investors. A rising trend that has picked up steam not only across the US, but also in Europe.
“Deal activity has been strong in the European market, and we have seen a notable increase in corporate investing, with CVCs now participating in 50-60% of rounds above $30m,” said McCracken. “Corporate investors have been providing vital resources as well as know-how, expertise and strategic support to local entrepreneurs.”
The European market has also seen a positive year on the exit side, with a flurry of deals and an increase in valuations across many sectors. “We have seen several great exits across Europe, including some outstanding IPOs, which are essential to driving up outside returns,” said McCracken. “Furthermore, US SPACs are calling on European companies, and this has become a valuable path for many businesses based in Europe. In addition, there has been considerable SPAC formation in Europe itself recently, and this also represents an interesting exit route that many European companies could successfully pursue.”
McCracken also noticed how M&A activity has increased across the market, with a significant expansion and differentiation of the players involved, including emerging companies eager to pursue build-up and consolidation projects.
“In addition to strong corporate and private equity M&A, in the last year we have also seen more and more startups buying other startups,” McCracken said. “Many companies have been able to raise hundreds of millions in funding and use part of their proceeds to finance their acquisition strategy. Despite multiples often being not as high as in IPOs and SPACs, these players are achieving an important goal: they are recycling capital back into the ecosystem in a way we had not seen before.”
McCracken also underlined another major trend that has accelerated across the market in the last year, impacting the strategy of many VCs and CVCs: sector specialisation. McCracken said: “In niche industries, often very highly regulated, such as deep tech, fintech and health tech, corporates that truly understand the dynamics of the sector have the ability to find promising investment opportunities and add value to their portfolio companies.”
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