Investors Eye Pvt Deals, M&As as IPO Mood Sours

Startup investors are turning to mergers and acquisitions (M&As) and offering their shares to new incoming investors, as severe market turbulence dashes their dreams of cashing out through initial public offerings (IPOs).

- Mansi Verma, Priyamvada C

Companies which had chalked out IPO plans but are dragged by weak financials will likely see M&As and so-called secondary share sales, experts said. The steady fall in stock markets since October and the latest flare-up from a tariff war have queered the pitch for IPOs, prompting investors to scramble for new exit routes.

According to Foundamental, a venture capital firm, the last few months have seen several investors offering to sell their shares in M&As or through secondary sales.

"While these (M&As and secondary sales) typically haven't come with the valuation premium that we used to see in the 2020-2022 cycle, the fact that there are market participants who are stepping in with such offers is a positive sign that well-run companies might have other options that provide a valuation backstop," said Shubhankar Bhattacharya, co-founder and general partner at the firm. He did not disclose specific names as the conversations are still ongoing.