In the last two years, AI has become the most talked about technologies in the world. AI-native products are revolutionizing how things are done – whether it’s in our personal lives or in companies.

With the launch of breakthrough LLM models like ChatGPT, more and more AI start-ups emerged. This was a boost to venture capital firms that ramped up investments in AI companies, attracted by the sector’s high growth potential.

Given AI’s rapid expansion, companies are jumping on the AI train to get the first mover advantage. Microsoft was amongst the first big tech companies to announce a $10 billion investment in OpenAI in 2023.

While companies like Microsoft and Amazon have already made significant investments in the space, we are now seeing an increasing number of firms acquiring AI businesses to maintain their competitive edge in the AI race.

This analysis covers M&A activity in AI industry and is complementary to our AI Valuation Multiples research. Understanding the strategic motivations behind AI M&A deals will help us gain deeper insights into the factors driving valuations and the overall trajectory of the AI industry.

Methodology

Our analysis is based on data from Mergermarket. We exported over 1,100 deals that were then reviewed for the following criteria:

  • M&A buyouts – We exclude fundraising activities, concentrating instead on majority stake acquisitions or buyouts that either reflect strategic moves or financial interests.
  • AI companies – We selected only companies with core AI capabilities, excluding those that primarily offer standard IT services or fall outside the AI sector.
  • Time period – Our analysis period starts in November 2022, specifically after the launch of ChatGPT, as this period marked a pivotal breakthrough in AI capabilities

M&A in AI – total M&A deals

AI-focused M&A deals are becoming an essential part of the tech sector. In the month following the launch of ChatGPT, there were 17 new AI focused acquisitions completed.

2023 was a great year for AI M&A deals with 271 deals completed and 2024 isn’t coming any slow. This year is expected to close with 326 AI deals – a 20% YoY increase!

Companies are increasingly recognizing the synergies that come from acquiring AI capabilities and integrating them to enhance their existing products. A recent example is Thomson Reuters’ acquisition of Materia, an AI startup for the tax, audit and accounting profession.

At Aventis Advisors, we forecast a 32% growth in AI deals in 2024 compared to 2023.

M&A in AI – by investor type

The increase in AI acquisitions is driven by both strategic and financial motivations. On average in the last three years, 30% of all M&A deals in AI were done by financial investors.

Financial investors (PEs and VCs) are primarily motivated by the growth potential and financial returns AI companies can deliver, while strategic investors look to integrate AI technologies into their operations, unlocking synergies and enhancing their product offerings

These acquisitions by strategics are often aimed at gaining access to valuable intellectual property, AI algorithms, or unique technologies that can strengthen a company’s position in the market.

M&A in Artificial Intelligence – by acquirer country

M&A activity in AI has been primarily driven by acquirers from the United States and Japan, with the US leading by a significant margin, accounting for nearly 38% of global AI acquisitions during the period under consideration. The USA remains the dominant force in AI growth, home to the largest tech companies and AI innovators.

Japan follows closely behind, with a strong focus on computer software and AI-driven solutions, particularly in the robotics and automation sectors. The United Kingdom also ranks highly among acquirer countries, with growing investments in AI technologies from both tech companies and financial investors.

Other countries like Germany, the Netherlands, Canada, and India have also emerged as important contributors to the global AI M&A landscape, though at a smaller scale.

M&A in AI – by target country

As for target countries, the USA leads AI M&A activity, attracting the most acquisitions due to its advanced AI infrastructure and ecosystem. Japan continues to be a key focus for both acquirers and investors looking to expand their AI portfolios.

The United Kingdom, France, and Canada are also prominent destinations for AI investment, with growing interest in sectors like data analytics and machine learning. Additionally, countries such as India, Germany, China, and Israel are becoming increasingly important as AI development hubs, offering high-growth opportunities and a strong talent pool that attracts international acquirers.

Strategic rationale for AI acquisitions

The rapid growth of AI-driven deals is largely fueled by the expansion of the AI technology market. Solutions like data analysis, automation, language processing, and generative AI have become key drivers of value creation across industries.

Technology companies now face a critical decision: adjust by integrating AI or risk falling behind competitors who leverage AI to reduce costs, enhance efficiency, and streamline operations.

While some companies may choose to build internal teams for tailored solutions, a more effective strategy is often acquiring businesses with ready-to-deploy AI technologies.

AI acquisitions are not limited to technology firms. Increasingly, advisory and service companies are executing deals to harness AI capabilities, allowing them to speed up repetitive tasks, reduce costs, and improve accuracy—often replacing junior staff roles.

This shift is improving operational efficiency, allowing companies to make more informed decisions.

Why you need a Technology M&A Advisor for your AI company

Keeping track of AI valuations and transaction activity provides valuable insights into market trends and helps you time your exit strategy effectively. However, every company is unique, just as every founder’s journey is unique. Therefore, it’s crucial to seek guidance from experts in the M&A space, particularly M&A advisors who specialize in the technology sector and can understand your specific situation.

Technology M&A advisors possess deep knowledge of market dynamics, valuation methodologies, and the intricacies of the M&A process. While you focus on managing your business, advisors diligently ensure that every detail is addressed and advocate for the best possible deal on your behalf. Technology M&A advisors success is intertwined with yours, and their expertise can often significantly influence the final sale price.

About Aventis Advisors

Aventis Advisors is an M&A advisor focusing on technology and growth companies. We believe the world would be better off with fewer (but better quality) M&A deals done at the right moment for the company and its owners. Our goal is to provide honest, insight-driven advice, clearly laying out all the options for our clients – including the one to keep the status quo.

Get in touch with us to discuss how much your business could be worth and how to maximize the valuation.