The number of acquisitions of French startups by companies has accelerated sharply since 2021, reaching over 100 transactions per year. Does this trend illustrate the growing maturity of the French entrepreneurial ecosystem, both for startups and for businesses?

In an uncertain economic and financial context, BCG and RaiseLab offer an overview of the acquisitions made over the past ten years. What are the objectives pursued in the context of these mergers? How do they work? What operational challenges do they present? One year after the publication of their study: “Corporate Venture Capital and start-ups: how to prolong love at first sight? ”, BCG and RaiseLab are devoting their new analysis to the acquisition of French startups by companies. Entitled” Acquisitions of French startups by major groups: from love at first sight to marriage of convenience? ”, this study analyzes more than 600 acquisitions made since 2013. Beyond a numerical assessment of the past ten years, this study proposes several keys to a successful union. The report is based on more than twenty interviews conducted with large companies, founders and former startup managers as well as several experts in the ecosystem.

‍More and more acquisitions, despite a significant drop in the median value of transactions

Within the French startup ecosystem, the exit market or “exits” is following a dynamic of strong growth. Buying by a company is the “way out” chosen by 77% of startups over the period 2013-2023. In total, 631 startup acquisitions were made between 2013 and the first quarter of 2023, including 246 between 2021 and 2023. We can thus observe a doubling of the number of transactions over the last two years with more than 100 acquisitions per year on average compared to ~50 annual acquisitions between 2013 and 2020.

While the number of transactions was stable in the first quarter of 2023, the total amount of transactions recorded a sharp decrease and amounted to 15 million euros, compared to 50 million euros over the same period in 2021.

” he economic context and the low number of IPOs position takeover by large companies as the exit method preferred by startup founders ” explains Olivier Sampieri, senior associate director at BCG.” These acquisitions are more than ever perceived as a source of innovation by companies, which is why they have multiplied in recent years.” adds Paul Jeannest, co-founder and CEO of RaiseLab.

A market boosted by scale-ups and foreign investments...

While funds and large companies represent 55% of buyers of French startups over the period 2013-2023, scale-ups tend to dominate the startup acquisition market. They have become the main buyers of startups since 2021 (29% of acquisitions over the period 2021-2023 compared to 15% over the period 2013-2020).

With regard to the nationality of these companies, the analysis shows a growing interest of foreign groups in French startups since 2018:

• Between 2013 and 2017, French investors represented on average more than half of buyers.
• Between 2018 and 2022, foreign investments (mainly European Union and North America) increased significantly to represent the majority (51%) of transactions in 2022.

”Although this trend has yet to be confirmed, market dynamics underline the growing attractiveness of French startups on the international scene. In recent years, American companies have acquired French startups more regularly and for a higher median value.” underlines Lionel Aré, senior associate director at BCG.

Three categories of objectives motivate these acquisitions

The interviews conducted as part of this analysis reveal increasingly structured acquisition approaches on the part of large companies. These mergers are motivated by three sources of value creation:

• Strengthen the core business. The acquisition of new technologies and the integration of new talent make it possible to accelerate innovation on existing offers.  
• Extend to adjacent business areas. Complement the core business with promising activities.
• Diversify/develop in other areas. Explore new markets and/or new products.

To pursue these objectives and achieve value creation, three main integration models are implemented:

• The standalone model: the startup maintains its operation while benefiting from the company's resources to continue growing. The company limits its intervention so as not to hamper its development dynamics
• The model in targeted reconciliation : some aspects of the startup's functioning are changing (e.g. HR management, finance...). Business bridges are created between the company and the startup.
• The full integration model: the core activities of the startup and the company work together. The startup disappears as an autonomous entity.

”The last few years have shown a better collaboration and mutual understanding of these two worlds. In France, players prefer to maintain a large degree of autonomy for the start-ups purchased in order to preserve their innovation dynamic.. However, the miracle recipe does not exist; hybrid approaches most often make it possible to meet the compromises necessary for the successful execution of the merger.” explains Paul Jeannest.

As in any union, some good practices to overcome difficulties

However, the success of these acquisitions is far from being systematic. Whether it is a question of frustrations, loss of skills or culture shock, it is essential to anticipate difficulties in order to prepare for and deal with them. The authors identify several best practices, each linked to a distinct phase of procurement. Among them:

• “Beware of love at first sight”, before the acquisition: Ask yourself the right questions: is the vision shared? To what extent is this acquisition in line with the company's long-term strategy?
• “Life for two”, post-acquisition: The analysis is particularly interested in the operational models developed to carry out these integrations. ” While they may seem fairly theoretical, these models of collaboration between the various stakeholders are crucial to the success of these unions. ” recalls Paul Jeannest, co-founder and CEO of RaiseLab. “Good management of personal interactions - between the founder, the sponsor and the executive committee - and interactions between legal entities - startups, affiliated business units and boards are essential ” he specifies.
• “Dare to break up”, knowing how to question yourself: If you made a mistake, know how to pivot and question the union and its goals, or even put an end to collaboration.

In an uncertain economic context, this study offers startups and businesses the keys to a successful union and move from love at first sight to marriage of convenience.

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