Private equity firms are still making big moves in the acquisition game

Startups increasingly depend on mergers and acquisitions for exits due to a sluggish IPO market. Private equity firms have invested over $56 billion in acquiring private, venture-backed companies in the past five years. In 2023, private equity firms announced 22 acquisitions of seed- or venture-funded private companies, with three deals revealing a total of $8.3 billion. Notable recent transactions include ModMed's $5.3 billion sale to Clearlake Capital Group and HealthEdge's $2.6 billion acquisition by Bain Capital. Private equity firms prefer to buy established companies with substantial revenue, often resulting in acquisitions of mature startups. Seed-stage companies are less likely to attract private equity interest, as they face more favorable exit opportunities from strategic industry buyers. Although public PE firm valuations have declined, significant numbers of later-stage companies, with 789 private, venture-backed firms in the U.S. valued over $1 billion, present opportunities for acquisitions. Many of these firms have seen reduced valuations since their market peak four years ago, making them attractive for private equity acquisitions.

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