AI Dealmaking Shows Signs of Life as Acquisitions Boom
After several years of suppressed activity, the market for mergers and acquisitions (M&A) involving AI-related startups is showing robust growth. A recent surge in deals suggests that venture capitalists (VCs) are finding opportunities for liquidity.
According to Crunchbase data, the first quarter of this year has already seen 65 acquisitions of AI-related startups that have received venture backing. This total surpasses both the fourth quarter of last year and the first quarter of 2024. If the current pace continues, Q1 could see a significant increase in deal volume compared to the average of 76 deals observed in Q2 and Q3 of 2024.
What’s more impressive than the number of deals is the capital involved. Several large acquisitions have significantly impacted the market.
Major Deals Drive Up Deal Values
The largest deal of the period involved ServiceNow’s acquisition of Moveworks, a provider of an enterprise AI assistant platform. The deal was valued at $2.85 billion in cash and stock. This marks the largest acquisition of an AI-related startup since the beginning of last year.
In the preceding week, CoreWeave, backed by Nvidia, acquired Weights & Biases, a developer of AI platforms, for a substantial $1.7 billion. This transaction ranks as the third-largest of 2024.
Last month, Metaphysic, a company focusing on AI-generated photorealistic content for entertainment, bought Brahma, an AI and content technology company, for $1.4 billion. This placed it as the fourth-largest deal involving an AI company since the start of last year.
Numerous other acquisitions, such as UiPath’s purchase of the agentic AI startup Peak.ai, also garnered attention. While the financial terms of this deal have not been released, the total disclosed deal value has reached approximately $7.4 billion. This represents an increase of over 1,750% from the $377 million in deals in Q1 2024 and a nearly 400% increase from the $1.5 Billion in Q4.
Market Outlook and Potential for Future Growth
While Q3 of last year saw $4 billion in disclosed deals involving AI-related startups, the first quarter of this year is already proving to be fruitful for VCs pursuing liquidity.
An M&A banker specializing in technology has indicated a tempering of early predictions for a full-scale market rebound this year. They anticipate “incremental growth” rather than the expected surge. Moreover, the banker noted that the rapid progress of the AI sector can make it challenging to focus on specific targets or technologies.
Despite this, buyers are clearly stepping up, poised to make significant investments in the AI market.
