For unicorns seeking an exit, M&A will not be your savior

All 3 of Facebook's $1B+ acquisitions were VC-backed at time of acquisition. (Photo Source: Mergr)

Considering that the public markets are ‘closed’ (at the moment) to tech-IPOs (although Dell’s recent spin-off of SecureWorks may have cracked the door slightly), the alternative for unicorns seeking an exit, at least those whose present financial performance is completely mis-aligned with any sort of desired public valuation, is M&A.

However, despite hundreds of billions in cash sitting on the balance sheets of such acquisitive notables as Apple, Microsoft, Oracle, Google, and Cisco Systems alone – the appetite for $1B+ acquisitions is simply not as strong amongst those that can afford to pony up for them as one would think.

And for VC-backed $1B+ acquisitions specifically, the number that actually happens is surprisingly rare.

There are a number of $1B+ deals that could easily happen (Slack at any moment), or could have (Snapchat’s well known rejection of Facebook as an example), however for the run of the mill unicorn that doesn’t pose an obvious threat (Snapchat) or provide a clear strategic advantage (Slack), reviewing the $1B+ acquisition history of possible suitors will not make the quiet IPO market any easier to bear for those thinking exit.

To help illustrate, here’s a list of well known tech acquirers, their Total # of Acquisitions, Total # of $1B+ Acquisitions, and Total # of $1B+ Acquisitions that were VC-backed at time of acquisition.

Amazon – 47 – 0 – 0

Amazon has made a couple of acquisitions close to $1B (Zappos and Twitch), however none valued over.

Microsoft – 153 – 8 – 1

Yammer (for $1.2B) is the only VC-backed $1B acquisition Microsoft has made. Skype, its largest acquisition to date at $8.5B, had traded hands twice and was PE-backed when Microsoft landed it.

Facebook – 58 – 3 – 3 

Whatsapp ($19B), Oculus ($2B), and Instagram ($1B)

Cisco Systems – 193 – 11 – 2

Jasper ($1.4B), Meraki ($1.2B)

Adobe Systems – 41 – 2 – 0

Google – 178 – 4 – 3

Nest ($3.2B), YouTube ($1.65B), and Waze ($1.1B)

HP – 87 – 11 – 0

Dell – 30 – 6 – 1

EqualLogic ($1.4B)

Apple – 72 – 1 – 0

Beats Electronics, Apple’s only acquisition for $1B+ was not venture backed.

Symantec – 66 – 1 – 0

IBM – 154 – 15 – 1

Trusteer ($1B)

Yahoo – 109 – 4 – 1

Tumblr ($1.1B)

eBay – 51 – 3 – 1

Skype ($2.5B)

Intuit – 48 – 1 – 0

Oracle – 110 – 10 – 0

All of Oracle’s $1B+ acquisitions were public at time of acquisition.

Salesforce – 37 – 1 – 0

The interesting thing is that many of the acquisitions above were not valued at or above $1B when they were acquired – in fact, most weren’t (Instagram, Skype, Waze, Tumblr, Trusteer, Yammer as examples).

The bottom line – the path towards an exit via M&A for existing unicorns is highly unlikely.