VC-backed buyers on the retreat The reset of the valuation environment - falling back to long-term average multiples - alongside a challenging fundraising environment could be perceived as factors that may drive an increase in ‘discount shopping’ for potential M&A targets. It’s clear, however, that for many potential buyers, it has simply meant putting a pause on M&A in order to focus on stability. This means that VC-backed company buying activity has fallen, mirror- ing the trends of the overall M&A landscape. The interesting trend in this chart, however, is looking at the relative importance of VC-backed buyers of tech companies in the US vs. Europe: in Europe, VC-backed companies account for just 23% of all M&A transac- tions involving tech company targets. In the US, this number is 55%. This delta can be attributed to the relative maturity of the tech ecosystems. In the US, there is simply a larger pool of at-scale, VC-backed companies that make up the potential buyer universe. This once again underlines the importance of the European tech 昀氀ywheel. The more the virtuous cycle helps to produce scaled technol- ogy companies, the more they will drive higher M&A volumes, helping to accelerate the process of recycling capital and talent in the ecosystem. In today’s uncertain times, we are focusing on strategic value and thinking in the long term. An acquisition has to bring us closer to our strategic objectives, not just increase our ARR. It has to complement our existing product, enhancing our capabilities through both people and tech. Jordi Romero Co-Founder & CEO, Factorial Additionally, nowadays capital e昀케ciency is a priority. For those with cash and/or equity in hand, it is probably one of the best moments to make really good acquisitions. On the other hand, if fundraising is needed for it, the cost of capital can make an acquisition less obvious despite the decrease in multiples. We are also placing a special emphasis on due diligence. We are making an extra effort to assess the 昀椀nancial health, customer base, tech, and cultural 昀椀t of the target company. Finally, timing is key. We are being proactive and seizing opportunities as they arise, rather than waiting for more stable conditions. Bucking the trend by acquiring a well-aligned company during uncertain times positions us to continue our growth and success in the future. 227 | Outcomes