With a €1 Billion Investment European Startups Flex their Acquisition Muscles

More private European IT corporations are buying smaller startups with a lot of money and plans to expand while remaining private.

So far this year, 13 VC-backed European tech companies have made at least two acquisitions, compared to only eight in 2020, according to Dealroom data.

The $600 million acquisition of US startup SparkPost by MessageBird by VC-backed private companies in Europe so far in 2021 brings the total value of disclosed acquisitions by VC-backed private companies in Europe to over €1 billion. According to Dealroom data, that’s more than ten times what it will be in 2020.

Davor Hebel, managing partner and head of Europe at VC Eight Roads, adds, “Conversations (regarding M&A) happen considerably more regularly.” “It’s all about establishing a clear market leader and having entrepreneurs and management teams that can genuinely handle” the transactions, says the entrepreneur.

The increase in acquisitions, according to VCs, is a reflection of the region’s entrepreneurs’ developing expertise. Given the large amounts of funding accessible to startups, founders and CFOs say it’s also easier to purchase, allowing European tech businesses to stay private longer and build a strategy for expansion through acquisition.

Hopin (5 acquisitions), SaltPay (4), Klarna (4), MessageBird (3), Kahoot! (3 acquisitions, two after the business went public in March), and Glovo (3 acquisitions) were the most acquisitive VC-backed private European digital companies in 2021 as of August 11.

Various motives for acquiring other companies have been stated by European startups and scaleups, including gaining market share in new markets, obtaining new offerings, or acquiring talent, particularly software developers.

Developing an M&A strategy can be intimidating for European firms that have never done so before. Being funded by a venture capital firm can help here, according to entrepreneurs, because they can tap into the experience of investors and their networks.

However, European startups and scaleups aren’t the only ones in the region looking for lucrative acquisition prospects. Private digital corporations in the United States are becoming increasingly interested, as evidenced by Gopuff’s acquisition of 10-minute grocery Dija just last week. To keep up, European players will have to move quickly.

Photo Credit: https://venturebeat.com/2018/05/06/eu-startups-dont-need-to-incorporate-in-the-u-s-to-succeed/