The global interest in initial public offerings (IPOs) is declining, with founders increasingly considering mergers and acquisitions (M&A) as more reliable exit strategies. According to Victor Basta, Managing Partner of Artis Partners, a specialist in sell-side M&A and growth financing for technology companies, the unpredictability of IPOs is steering many towards M&A as a preferred option.
In 2024, the UK experienced one of its quietest years for IPOs, with only 18 companies listing on the London Stock Exchange. Globally, IPO volumes dropped by 10%, emphasizing a broader shift towards alternative exits that offer greater liquidity for shareholders. Basta pointed out that the reasons for this decline vary by region but share common themes of uncertainty and market challenges.
“In the UK, net outflows and investor preference for profitability over growth are discouraging founders from pursuing IPOs," Basta explained. "The current market environment doesn’t support growth-stage companies, which explains the recent decline in IPO activity."
In contrast, US companies face challenges related to the high costs of being public and the competitive landscape. "In the US, IPOs only make sense for companies with at least a $1 billion valuation, strong brand recognition, and clear sector leadership," said Basta. "Sub-$1 billion companies are often classified as 'micro-caps' and face significant obstacles in attracting investor attention."
Basta also highlighted the general unpredictability of public markets. "Even when discounting geopolitical shocks and unexpected market shifts, a company can perform well and still experience a falling valuation," he noted. "Additionally, the IPO process lacks stability, with uncertainty persisting until the final moments before a company goes public."
In contrast, M&A deals offer greater reliability. "It’s rare for strategic buyers or private equity acquirers to withdraw at the last minute, as they have significant stakes in the process," Basta explained. "This reliability breeds confidence among founders seeking secure exit routes."
While Basta believes IPOs may regain some momentum in 2025-2026, he remains cautious. "Structural challenges in global stock markets won’t be resolved overnight," he concluded. "As a result, many founders are now viewing M&A as the most dependable path to securing high exit values."
This shift underscores the growing role of M&A in shaping the exit landscape for businesses worldwide.
