INSUBCONTINENT EXCLUSIVE:
In the name of getting big quick, it seems like some of the most valuable private tech companies are turning to mergers and acquisitions
(MA) as a way to accelerate business growth
So-called “unicorns”—privately-held technology companies which achieve billion-dollar valuations sometime before (or as a direct
result of) going public or exiting via MA—are chomping at the bit to make their first acquisitions, suggesting a mounting pressure on
companies to grow even quicker.Analysis of Crunchbase data indicates that, on average, recently founded unicorn companies are more likely to
make their first MA transactions sooner after founding than their older counterparts
In other words, younger unicorns buy other companies earlier
Here’s the data.The narrowing gap between founding and first MAUsing MA data for companies in Crunchbase’s unicorn list, we found out
when unicorn companies made their first MA transactions on average
(We detail a bit more of the methodology in a note at the end.) Companies founded in more recent years were quickest to hit the MA
trail.Eleven unicorn companies founded in 2007 took an average of roughly 8.33 years before making their first acquisitions
At time of writing, 29 unicorns founded in 2012 have made their first startup purchases, averaging just 4.1 years before doing so.Note that
there’s a bit of a sampling bias here
To an extent, it’s expected that unicorn companies founded in more recent years will have a lower average age of first acquisition,
because there are many unicorn companies which haven’t yet made their first MA deals.The bulk of all MA transactions by unicorns (not just
the first ones) occur within the first seven years after founding.We should take recent years’ dramatic reduction in average time until
first acquisition with a heftier grain of salt (again, there are plenty of unicorns which haven’t yet gone shopping for startups)
Even with that caveat made, averages have steadily trended lower between 2007 and 2012, after remaining steady (across an admittedly small
sample set) since the start of the unicorn era.This suggests that younger unicorns are increasingly using MA transactions as a way to
accelerate their path to massive market power.It’s a big move for a company to buy another one
There’s all the financial particulars to negotiate, the legal and regulatory hurdles to clear, and the inevitable friction of integrating
teams and technology from one entity with another
And that’s when the process is amicable and goes smoothly
The amount of time and resources a company commits to carrying out an MA strategy is nontrivial, so it’s understandable why a company
would put this process off to a later date or eschew it entirely
That high-growth tech companies are pursuing such a time and energy-intense strategy earlier on in the venture life-cycle points to the
benefits MA can bring to startups seeking to scale speedily.Methodology notesWe found this by analyzing the set of acquisitions made by
companies in Crunchbase’s list of unicorns, which we used as a proxy for “high-performing private technology companies” as a
We found the time elapsed between unicorns’ listed founding dates (which, note, have varying levels of precision) and the date of their
first-ever acquisitions, regardless of whether the acquirer had achieved unicorn status
We then plotted the resulting data in a couple of ways.More information about Crunchbase News’s methodology can be found on a dedicated
