- Adobe’s $20 billion bid for Figma is reopening conversations about what the future holds for software startups.
- Software companies that can become features of larger platforms are targets for incumbents.
- These are 15 private and public software companies that analysts think could be takeover targets.
Adobe’s $20 billion bid to acquire Figma is the largest acquisition of a private software company, according to Bloomberg data, and has reopened talks about what the future holds for software startups, at the time where IPOs and blockbuster deals are mostly on pause.
Over the past few years, productivity-and-collaboration tools like Figma, Miro, Airtable, and Notion have garnered unprecedented funding and high valuations thanks to the shift to remote work and corporate interest in new software tools.
However, as public-market valuations decline, many of these startups are pausing plans to go public for fear of their valuations falling. Figma did not face that issue with Adobe’s bid because the purchase price was double Figma’s last private estimate of $10 billion.
As companies look to cut spending amid the slowdown, many of these startups are facing critical moments where they must prove their value and need to customers. This often involves making the leap from one product to an entire platform of tools.
In this environment, analysts and experts expect consolidation, and for larger players to use this as an opportunity to acquire new tools at a good price.
Buying more than the building
A person familiar with tech deals on Wall Street who requested anonymity told Insider that even struggling companies can look to M&A because buying a good startup can be more cost-effective than wasting time. and money to experiment in-house to develop the product themselves. The Wall Street deal expert spoke on condition of anonymity because of the sensitivity of business deals.
In particular, software companies that make tools that can be integrated as features on larger platforms will be attractive acquisition targets, some analysts said.
While startups have built businesses around project management tools, video collaboration tools, whiteboard tools and the like, there’s a limit to how big a product offering they can get. . Many are expanding into platforms, and one way they may choose to do that is by joining a larger software company that has already built an established platform of tools, experts say.
“We’re in a really interesting position for what I call feature companies to acquire,” said Dan Newman, an analyst at Futurum Research. “We’ve had a lot of companies that kind of feature that have become publicly traded companies, not necessarily super profitable, not necessarily growing that fast.”
Other options to build these platforms internally are limited due to their high costs and the difficult funding market, the Wall Street deal expert told Insider.
The types of tools that are desirable
Two areas in software likely to see more consolidation are productivity-and-collaboration tools and marketing-or-sales tools, said Rishi Jaluria, an analyst at RBC.
A Wall Street deal expert told Insider that any of the top 10 startups on Forbes’ Cloud 100 list, with the exception of payments giant Stripe because of its size, are fair game for acquisition targets. Stripe was most recently valued at $74 billion. All these upstarts pose a serious threat to legacy players, who may take the opportunity now to knock off the competition, the expert said.
While startups are targets, some public companies are potential acquisition targets if they have reached the peak of their growth potential on their own, analysts said.
Here are 15 private and public software companies that analysts and experts think are likely acquisition targets.