So far in 2025, we have been seeing an increase in mergers and acquisitions (M&A) as an exit strategy for startups. After a period of an icy initial public offering (IPO) market the past few years have seen growing dealmaking in M&A activity, despite not reaching the highs of ~$6T in 2021.[1] In this blog, learn more about the rise of M&A in 2025, what may be driving the growth, and what M&A growth means for private market investors.

The Rise of M&A in 2025

The data from the first half of 2025 shows the growth of M&A through the year. According to Crunchbase, acquirers made just over $100 billion worth of disclosed-price startup purchases in H1 2025. This represents a 155% increase from the same period in 2024.[2] While there was also an increase in the number of deals, reaching 918, up 13% year-over-year, AI companies and cybersecurity startups were major contributors to the numbers.

Examples of 2025 M&A Deals

A few news-catching deals were announced in H1 2025, most notably:

Google’s planned $32 billion acquisition of cloud security unicorn Wiz, which is slated to be one of the largest startup acquisitions on record
OpenAI’s $6.5 billion purchase of Io, an AI-device startup co-founded by Apple’s Jony Ive
SoftBank’s $6.2 billion cash acquisition of chip design company Ampere Computing

Why Now?

Several key factors may be contributing to the rise of M&A in 2025.

Pent-Up Demand

After a period of economic uncertainty, dribbling over after the COVID-19 pandemic, large public companies are under pressure to grow. Organic growth can be challenging and making acquisitions the fastest way to acquire new technology, talent, and market share. For sectors like cybersecurity, AI infrastructure, and enterprise software, buying innovative startups can be seen as a strategic necessity to stay competitive.

A Pipeline of Mature Startups

The venture funding peak of 2021 created a large cohort of well-funded, maturing startups. Four years later, investors may be eager for growth, and many of these companies are exploring exit options. With the IPO window only just beginning to creak open again, M&A has become a liquidity option for a number of these companies.

The AI Gold Rush

Artificial intelligence is one of the trends fueling the market. As major companies like Google, IBM, Anthropic, OpenAI, xAI, and others fight to come out on top of the AI race, companies are looking for the top talent and ideas to advance their current AI efforts. The fierce competition for AI talent and IP and the rise of AI acquihires is helping to drive the overall rise of M&A.

Impact on Other Exits and Funding Opportunities

The increased M&A activity could have a ripple effect across the entire funding landscape that is important to understand.

IPOs

So far in 2025, the IPO market has been showing some signs of life, with successful debuts from companies like Circle and Chime. However, M&A is currently the leading exit path of the year. A strong M&A market can pave the way for more IPOs by building confidence in the overall exit environment and providing comparable valuation data. For many companies, an acquisition at a strong valuation can be more attractive than the volatility and scrutiny of going public.

Venture Funding

The increase in M&A could also be a positive signal for venture funding. It can demonstrate a path to return on investment (ROI), which may make investors more confident in deploying capital into new rounds. However, as funding has been highly concentrated in AI and cybersecurity, other sectors may not be seeing the same effects.

Key Considerations

For private market investors, this increased M&A environment can present both opportunities and challenges.

The Importance of Realistic Valuations

In a market with increased M&A activity, investing at reasonable valuations in the early stages could be important. Investing at a reasonable valuation can leave more room for positive results on the other side of an acquisition.

Sector Focus is Important

AI, cybersecurity, and enterprise software are the sectors helping to drive the largest deals. While not every investment should chase a trend, understanding where acquirers are spending their money can be important for identifying companies that might be targeted by acquisitions next.

Due Diligence on Acquirer Fit

When evaluating a startup, consider its strategic value to potential acquirers. Does it have proprietary technology, a unique dataset, or a talented team that would be a compelling addition to a Google, Microsoft, or Cisco? Investing with an “acquirer’s eye” may be able to help identify opportunities.

Final Thoughts

The rise of M&A in 2025 is providing much-needed liquidity for startups and investors and setting the stage for the next cycle of investment. However, it also has ripple effects on other aspects of the startup ecosystem like IPOs and venture funding. While challenges do exist, the increase of M&A activity could have positive impacts on the startup ecosystem.

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[1] https://www.bain.com/about/media-center/press-releases/2022/global-ma-report-2022/

[2] https://news.crunchbase.com/venture/state-of-startups-q2-h1-2025-ai-ma-charts-data/

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.

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