January 10, 2023

RIP IPO: What will startup exits look like in 2023?

With public and private tech valuations down, the end of the startup lifecycle is about to get a whole lot more interesting

Amy O'Brien

5 min read

The cofounders of Wise, which made a rare debut on London's stock exchange in 2021

If you’re a startup founder looking for an exit, anyone will tell you it’s probably not the time to be gunning for a public listing.

Amid a global rout in equities, some recently listed European tech companies have seen their shares plummet by up to 98%. That means startups looking for an exit must find other means this year — namely being bought by another company. 

2022 saw a 64% drop in VC-backed startup exits via M&A, according to Atomico data, but M&A lawyers tell Sifted that this is about to change. They say there are already several such deals in the pipeline in Europe, many of which will become public in the first two quarters. 


But who could be the big acquirers in 2023? 

Startup-to-startup M&A

The first acquirers of startups will themselves be startups.

One founder of a mid-sized fintech says “everyone in my subsector is talking to everyone” about potential deals — a claim echoed by several other founders.

We’ll see exits via M&A between startups play out in two different ways. First, there will be consolidation among peers, where similar-sized companies that are direct competitors or offer complementary products will merge. Niche sustainability-focused neobank Twig’s acquisition last week of a similarly niche neobank for teens, Vybe, is a prime example. Such deals are typically supported by an existing anchor investor on one side of the cap table and can be a way of kicking the can down the road on a full exit. 

“If startups can do the right sorts of strategic M&A to combine themselves into a bigger platform, it helps them to prepare for a better eventual exit when it comes,” Fionnghuala Griggs, corporate partner at Linklaters, says. 

The second category of deals will see more mature, well-funded companies acquire cheaper assets. Investors repeatedly predict this trend will blossom within the fintech sector especially, thanks to how much funding it gets and how it's full of companies that are generating a lot of cash and approaching profitability. 

Larger companies will take advantage of their smaller peers’ reduced valuations to add different dimensions to their business faster and cheaper than doing so internally — whether that be acquiring customers, tech capabilities or in the form of acquihires. Within fintech, VCs predict oversaturated verticals that have a handful of clear leaders like neobanks, payments and open banking will account for a large chunk of such deals.

“I think this kind of acquisition will make up a fairly significant part of exits in 2023, particularly in the second half of the year,” says Daniel Turgel, partner at White & Case.

Big Tech and corporates buy startups

The last year saw Meta, Apple, Amazon, Google and even Twitter continue their digital landgrab by moving into offering retail finance products like payments, lending and credit. So much so that they caught the unwanted attention of antitrust regulators along the way. 

As European fintech valuations fall, industry watchers say their eyes may increasingly stray this side of the pond. 

Investors stress that, given Big Tech’s own recent cost-cutting measures and sweeping layoffs, they’re more likely to look further down the value chain, at earlier-stage businesses that have had their valuations slashed considerably. 

If you’re a company like Amazon taking a long-term view, now is the time to make good deals

“We’re not talking the likes of Revolut or Checkout — even if they’re marked down a bit these are way too expensive,” says Mathias Ockenfels, general partner at Speedinvest.


“But if you’re a company like Amazon taking a long-term view, now is the time to make good deals and snap up younger companies for cheap.”

Then there are more traditional corporates who will be on the prowl. High street banks flush with cash due to higher interest rates could “have an absolute M&A field day” when it comes to tech companies, according to one lawyer.

Experts predict their targets will be fintechs that operate in the banking space that they can easily plug into their current product offering. 

Other cash-rich corporates are those in the energy sector who have benefitted from higher prices. They could start looking to poach their forward-looking, "greener" peers.

It’ll be the boring infrastructure companies that will benefit buyers the most

“Fossil fuel companies are likely to want to put their capital to work,” says Nalin Patel, lead EMEA private capital analyst at Pitchbook.

“So one way they could do that is by acquiring small renewable energy companies to futureproof their business.”

Lastly, the insurance sector is typically resilient when other parts of the market are in turmoil, and legacy businesses might finally take the current valuation dip as an opportunity to modernise their notoriously antiquated processes. 

“They’ll be looking to improve underwriting, automate processes, cap operational costs and expand into niche offerings,” says Giuseppe De Filippo, head of direct private investments at Swiss private bank Julius Baer. 

“It’ll be the boring infrastructure companies that will benefit buyers the most,” he adds.

Private equity swoops in

Up until now, private equity (PE) buyouts have been a relatively uncommon exit route in European tech. Analysts predict that now mature startup valuations are a bit more realistic, they’ll become more attractive targets for private equity — a group of investors known for loving a bargain.

“I think we’ll see a really active PE environment particularly in SaaS and fintech, where there are more mature and profitable businesses, and platform opportunities,” says Turgel.

“For example, a PE fund might employ a ‘buy to build’ strategy where they take one big company in a particular sector then pick up lots of smaller assets in the same sector around it as well — the usual private equity ‘bolt-on’ story.”

We could likely see PE firms swoop in to acquire these companies at a lot lower multiples

Lastly, given how badly newly listed tech stocks have fared on the public markets, analysts expect we could see European tech experience the exact opposite to IPOs: public to private deals (P2Ps), where tech companies are de-listed. 

“We could likely see PE firms swoop in to acquire these companies at a lot lower multiples while their share price has undergone this drastic decline,” says Patel. 

“Then ultimately, these firms will be hoping to flip them back to public in five to seven years, by which time multiples will have gone through the roof again and markets will have rebounded.”

Amy O’Brien is Sifted's fintech reporter. She tweets from @Amy_EOBrien and writes our fintech newsletter — you can sign up here. 

Amy O'Brien

Amy O'Brien was a reporter at Sifted, covering fintech