2018 was a year of excess. 2019 was a year of reality
checks. And 2020 is the year of sustainable growth?
According to Silicon Valley Bank’s State of the Markets report, the markets are still flush with corporate cash and record dry powder. SVB anticipates M&A activity to remain strong in 2020. Already, more and more companies are seeking out acquisition opportunities. Below are several predictions from SVB’s report for the year ahead:
— M&A heats up even more: Large tech companies
will wake up to the realization that one of the best ways to grow the top line,
acquire new technologies, and stave off competition is M&A. In the last
three months, we’ve seen two massive acquisitions. The first was PayPal’s purchase
of Honey, a deal-finding browser add-on and mobile app, for $4 billion. The
second happened just this month with Visa’s
purchase of Plaid, a fintech company that connects users’ bank accounts to
apps and services, for an eye-popping $5.3 billion.
— The bull market continues: Slowing macroeconomic conditions and the trade war weren’t enough to stop tech in 2019. It saw its best full-year performance of the decade — returning 48% compared with 29% in the broader market. This trend is projected to continue into 2020 as companies still have plenty of cash to deploy.
— Bigger isn’t always better: In 2019, we
learned that valuation isn’t everything. Many companies painfully realized that
sustainable growth and profitability are perhaps more important than growth at
all costs. Some of 2019’s most anticipated unicorn IPOs experienced a harsh
reality check in the public markets. SVB predicts that late-stage valuation
sizes will start to decline as investors take longer to perform their due
diligence. This is a big departure from previous years, and it’s the trend that
could define the entire decade.
LOCKDOWN MODE: The new coronavirus has now infected more than 7,700 people globally. Plenty of companies across the world are concerned. Multinationals are responding by placing restrictions and outright bans on employee travel to China, indefinitely closing offices in the country, and telling employees to work from home. Read more.
HOW CONFIDENT ARE YOU? Term Sheet has teamed up with Semaphore for its 12th annual confidence survey of private equity and venture capital professionals. In the past, hundreds of you have chimed in with your confidence levels for the year ahead. I encourage you all to take the survey here. The results will be published here early next month. Please take the time to fill it out!
There’s still lots of dry powder to deploy.Read More