AI-focused M&A deals have seen substantial growth in recent years, fueled by the rising demand for technologies like automation and data analysis. Learn how businesses are acquiring AI capabilities to improve operations, cut costs, and stay competitive in the AI Winter 2025 Report.
ARTIFICIAL INTELLIGENCE ANNUAL REPORT
2025
Index
Macroeconomic Overview
03
Industry Overview
07
Market Breakdown
12
M&A Activity
16
Select FE International Transactions
20
AI Funding
23
Looking Ahead
28
Behind this Report
30
About FE International
31
2
Macroeconomic Overview
A New Year, a New Hope
Real GDP Growth (% YoY)
Global economic outlook is more hopeful for 2025. Cabinet changes across several of the G20 and accommodative monetary policies signal greater potential for growth across markets and industries. The incoming US Presidential Administration heavily influences the global macroeconomic outlook for 2025. The election of Donald Trump in the US is widely expected to improve the economic and regulatory landscape for business owners. In the international arena, President-elect Trump’s trade policies will likely focus on attempting to solidify U.S. dominance in areas such as digital technology and artificial intelligence, broadly benefitting the tech industry as a role. US President-Elect Trump's generally pro-business stance is encouraging to global markets. The new administration's proposed tax policies could lead to substantial changes in the US economy and its partners. Tax cuts, particularly for corporations and high-income earners, might stimulate investment and economic activity. While global financial markets are especially poised for a potentially transformative period, across- the-board tariffs from the US would be unusual — the impact on the global economy could be considerable. However, the potential imposition of tariffs is more likely the starting point of negotiations. Worldwide GDP is forecast to expand 3.0% next year, slightly below prior estimates. The UK and EU are expected to continue to struggle with growth but could be impacted positively by events in the U.S. In China, growth is expected below the official 5% target for the year. For the U.S., there is no consensus, and forecasts are being reconsidered at this writing. Goldman Sachs and UBS forecast 2025 U.S. GDP growth at 2.7-2.9%. The U.S. economy could initially grow slightly faster under Trump's plans to cut corporate taxes, but that impact could quickly fade depending on the effects of a tariff conflict. The Conference Board’s Consumer Confidence Index rose to 111.7 in November 2024, an increase of 2.1 points from October and the highest level since July 2023. This likely reflects increased consumer optimism following the U.S. presidential election and more positive assessments of the current labor market.
4.8%
4.1%
3.3%
3.0%
2.9%
2.7%
1.5%
1.2%
0.9%
0.8%
24E 25E
24E 25E Euro Zone
24E 25E
24E 25E
24E 25E
US
UK
China
World
Consumer Confidence Index (%)
Index, 1985 = 100
140
Recent uptick in Consumer Confidence
130
120
111.7
110
100
90
80
2020
2021
2022
2023
2024
2025
Source: S&P Global Economic Research and The Conference Board.
4
The Lower Middle Market: A Hidden Gem for M&A Central banks worldwide have continued a gradual reduction in policy rates, which is expected to greatly benefit M&A activity through 2025. The lower-interest-rate environment benefits sellers by making deals more affordable and attractive. Lower borrowing costs translate to reduced debt, quicker deal timelines, and less complex financing structures. Sellers may be able to negotiate for larger upfront payments and fewer deferred payments or earn-outs, as lower borrowing costs reduce the need for such complex arrangements.
The recent interest rate cuts are encouraging for buyers and sellers alike, especially as capital deployment becomes a priority at year end. The [US] Fed didn’t commit to a timeline for the next cut, possibly a signal of caution with policy shifts from the new US administration. Inflation is still “somewhat elevated," so they are walking a tightrope. Powell’s challenge? Balancing a cooling labor market with inflation control. For business owners, this could mean opportunity in the months ahead.
Thomas Smale CEO of FE International
The underlying technology and platform primarily drive lower middle market deals. Lower middle market deals valued under $100 million often require less financing, making them less sensitive to interest rate fluctuations, but lower rates can lead to even more favorable terms and increased deal activity. Importantly, overall economic optimism and a pro-business environment can lead to increased deal activity, especially in the lower middle market. For instance, the US President- elect has expressed plans to deregulate the financial industry and emphasizes technology solutions for financial transactions, which portends well for increased deal activity.
Interest Rate (%)
Rate cuts by Central banks
Quote from Randal The true driver of success in lower middle market technology deals lies in the underlying technology. In sectors like FinTech, where innovation is paramount, the ability to acquire and deploy transformative technologies will ultimately determine deal outcomes. Additionally, a pro-business environment can, on the margin, prompt more transactions to be considered and pursued.
4.38% 3.40% 4.75%
1.00%
Randal Stephenson Head of Investment Banking of FE International & CEO of FE Capital Markets LLC 1
Jan-22
Sep-22
Jun-23
Mar-24
Dec-24
US (Fed)
Euro Area (ECB)
United Kingdom (BoE)
Switzerland (SNB policy rate)
Source: Interest rates as per central bank data of respective regions. Note: ECB = European Central Bank, BoE = Bank of England, SNB = Swiss National Bank. (1) Securities transactions offered and managed through FE Capital Markets LLC, Member FINRA/SIPC (FINRA CRD# 314943).
5
Venture Capital & Private Equity Investment Outlook
VC Dry Powder ($B) by Vintage
PE Dry Powder ($B) by Vintage
$800 B
$1,800 B
$1,600 B
$700 B
$1,400 B
2024 2023 2022 2021 2020 2019 2018 2017 2016
$600 B
2024 2023 2022 2021 2020 2019 2018 2017 2016
$1,200 B
$500 B
$1,000 B
$400 B
$800 B
$300 B
$600 B
$200 B
$400 B
$100 B
$200 B
$0 B
$0 B
2014 2015 2016 2017 2018 2019 2020 2021
2022 2023 2024
2014 2015 2016 2017 2018 2019 2020 2021
2022 2023 2024
• Venture capital fundraising in 2024 exceeded 2023 levels. Private equity fundraising, while anticipated to be lower due to higher interest rates, still surpassed $500 billion. • VC and PE firms hold approximately $650 billion and $1.4 trillion of dry powder, respectively. Favorable market conditions should create a favorable environment for robust M&A activity across sectors.
• M&A activity could surpass 10-year averages as US President-elect Donald Trump's pro-growth policies, lower corporate taxes, and expected deregulation are anticipated to create a deal-making surge in 2025, according to Goldman Sachs CEO David Solomon.
Source: Pitchbook Q3 2024 Global Private Market Fundraising Report and NY Post, 10 December 2024.
6
AI Industry Overview
The Artificial Intelligence (AI) industry continues to benefit from robust expansion and disruptive advancements: The State of Artificial Intelligence
The global AI market size is estimated at $269 billion in 2024 and is projected to grow at a CAGR of 36.6%, reaching $1.7 trillion by 2030 , with the United States being the largest market. M&A activity in the AI sector is experiencing significant growth, with transaction sizes ranging from smaller deals of $10 – $50 million to multi-billion-dollar acquisitions by leading industry players such as Microsoft, Nvidia, and Salesforce. Private M&A transactions under $100 million have surged in 2024, driven by demand for niche-specific AI solutions. Smaller AI startups in areas such as content generation, marketing tech, and fintech are attracting attention for their scalable models and ability to fill market gaps. From 2023 to 2024, the value of M&A deals rose by 8% to $49 billion. In 2024, AI-related M&A activity experienced a significant surge as companies aimed to capitalize on the expanding potential of generative AI and other advanced technologies. This growth highlights AI's growing significance in the investment landscape. Regulations on data privacy are tightening globally, and AI will face similar scrutiny as it disrupts industries. In response, AI companies will continue to adapt their business models to ensure the seamless integration of AI into society. This shift will require innovation and close collaboration between technology developers and regulatory frameworks to ensure the responsible deployment of AI.
Growing Market
AI-Driven M&A Boom
Increased Regulations
Source: Grand View Research, Reuters, Finro Financial Consulting, and Economic Times.
8
The global artificial intelligence market size is estimated at $269 billion in 2024 and is projected to grow at a CAGR of 36.6% to reach $1.7 trillion in 2030 , fueled by investments from strategic as well as financial and sovereign investments. Robust AI Market Growth
(In billions of USD) AI Industry Market Size
1,745
Growing Market
• Machine and Deep Learning: The increased use of deep learning and machine learning technologies has optimized data analytics, allowing computers to more accurately identify trends and make predictions. • Generative-AI: Generative AI has significantly enhanced the quality of images, videos, and text, transforming the content creation process within the marketing industry. • Increased M&A Activity: AI-focused M&A deals have seen substantial growth in recent years, fueled by the rising demand for technologies like automation and data analysis. Businesses are acquiring AI capabilities to improve operations, cut costs, and stay competitive. This trend is not limited to technology firms; advisory and service companies are also adopting AI to streamline processes and boost accuracy.
1,277
935
685
501
367
269
2024E 2025F 2026F 2027F 2028F 2029F 2030F
Source: Grand View Research
9
Implementing AI into business operations can significantly boost a company’s valuation and future growth by driving efficiency, enhancing decision-making, and enabling innovation. Furthermore, AI-driven innovation fosters new business models, products, and services, creating additional revenue streams. As a result, businesses that integrate AI are better positioned to scale, remain competitive, and capture long-term value, ultimately increasing their market valuation and growth potential. In today's competitive market, success could be measured by the "AI Delta" — the crucial difference between businesses that successfully leverage AI and those that fall behind. Successful implementation of AI could lead to upwards of 19% growth in EV , projections show. As organizations incorporate AI into their operations, market looks to assess their unique AI Delta to identify opportunities for value creation or risk areas that could impact their future growth and valuation. Companies that harness AI to gain a competitive edge experience significant growth, while those that fail to do so see their value decline. AI-Infused Value Creation
AI Implementation Delta
19% increase
EV gain potential from a holistic, actionable AI strategy
9% destruction
EV risk potential from a poorly executed, nonspecific AI strategy
Future
Today
Note: AI= Artificial Intelligence; EV= Enterprise Value
Source: L.E.K
10
The Rise of AI AI is revolutionizing education by transforming how students learn and how educators teach. With technologies like machine learning, natural language processing, and data analytics, AI enables personalized learning experiences, intelligent tutoring, and improved educational insights. The increasing adoption of AI is also driving M&A activity, with investors targeting AI-driven educational technologies to expand capabilities and accelerate innovation within the sector. As AI adoption grows, educational institutions are utilizing AI for tasks such as grading, lesson planning, and personalized learning. This trend has attracted the attention of private equity and venture capital firms, who are fueling M&A activity by investing in AI startups. These investments enable the development and expansion of AI-driven platforms, helping schools and universities implement more efficient and effective AI solutions. Education
Global Market Value for AI in Education
(In billions of USD)
21.1
5.6
2024
2028
Marketing
Global Market Value for AI in Marketing
AI is revolutionizing the marketing industry by providing cutting-edge tools that boost both the efficiency and efficacy of marketing strategies. By harnessing the power of machine learning, natural language processing, and predictive analytics, marketers can craft personalized customer experiences, fine-tune marketing campaigns, and make more informed decisions. These AI-driven solutions empower businesses to analyze vast amounts of consumer data, uncovering behavioral patterns to target specific audiences with relevant content and promotions. The rise of AI in marketing is also sparking increased investment and M&A activity, as companies seek to integrate AI-driven solutions into their existing platforms. Private equity and venture capital firms are focusing on acquiring AI startups to accelerate the development of marketing technologies that will allow for more efficient consumer insights and innovative advertising solutions.
(In billions of USD)
646.3
287.0
2024
2028
Source: Microsoft, Forbes, and Research and Markets, Grand View Research, and Market.us.
11
AI Market Breakdown
AI Market Overview by Region
Regions that gain the most from AI
North America
Northern Europe
U.S. AI Market Trends The U.S. AI market, valued at $42 billion in 2023, has made significant strides in the field of AI and robotics. North America captured 30.9% of the revenue share in 2023, driven by supportive government policies. These initiatives include investments in AI research, the creation of specialized institutes, and the application of AI in critical sectors such as public safety, transportation, and healthcare. Europe AI Market Trends Europe's AI market is growing rapidly, with a projected 33.2% CAGR from 2024 to 2030. The UK, capturing 24.8% of Europe's AI revenue, spearheads digital adoption in industries like finance and healthcare. Germany and France are also witnessing substantial AI growth, fueled by government initiatives and increased R&D investments. Asia Pacific & MEA AI Market Trends APAC made up 25.6% of global AI revenue in 2023, with China and India leading in AI applications. China’s AI market is expected to grow at 43.5% CAGR due to the implementation of AI applications, such as robotics and virtual assistants in various end-use industries. The Middle East and Africa's AI market is set to reach $166.33 billion by 2030, driven by AI language processing and initiatives like Saudi Arabia's Saudi Data and AI Authority(SDAIA).
9.9% of GDP ($1.8 Trillion)
14.5% of GDP ($3.7 Trillion)
China
Southern Europe
26.1% of GDP ($7.0 Trillion)
11.5% of GDP ($0.8 Trillion)
Developed Asia
Latin America
10.4% of GDP ($0.9 Trillion)
5.4% of GDP ($0.5 Trillion)
Rest of the World
5.6% of GDP ($1.2 Trillion)
Source: Grand View Research, Statista, and PWC Analysis
13
Q3 2024 saw a 49% increase in M&A deal value compared to Q4 2023, driven by mid-sized transactions in key sectors like Healthtech, FinTech, and industrial automation. This upswing reflects renewed market confidence, with strategic acquisitions shaping a more diverse industry landscape. Established companies sought synergies, while startups capitalized on M&A to scale and penetrate new markets, further accelerating the momentum. Major industry moves further highlight this trend. NVIDIA’s $250 million acquisition of OctoAI emphasizes its strategic growth, while Black Sesame Technologies’ $2 billion IPO showcases the increasing focus on AI hardware. Google’s $2.7 billion deal for Character. AI’s LLM technology underscores the value placed on advanced AI solutions, marking a shift in how tech giants are securing cutting-edge capabilities in early years of the business. These developments highlight the AI sector’s commitment to innovation & large- scale funding. Investors are prioritizing opportunities with long-term potential, signaling a more strategic approach to AI growth in 2024. Strategic Refinement: Optimizing AI M&A Rounds
Date Announced
Amount (Million)
Company
Buyer
Nov-2024
$82
Oct-2024
$250
Sep-2024
$80
Sep-2024
Sonio
$93
Sep-2024
$97
Jul-2024
$150
May-2024
$65
Source: Pitchbook.
14
Major Investors by Segment
Investor Type Commentary
Major investors
AI investor interest soars as the industry lessens its focus on crypto and fintech. The US became the largest funding source for AI startups, with Andreessen Horowitz, Sequoia, and Tiger Global leading major investment rounds.
Financial / VC
Tech giants are flexing dedicated venture arms, like Google Ventures and Intel Capital, to significantly invest in AI startups. Aligning niche players and their systems within broader corporate strategies helps secure both emerging technologies and competitive market footholds efficiently.
CVC / Strategic
The public sector is ready to leave behind lagging legacy systems. Digital technology platforms are helping government agencies retire inefficient infrastructure, thereby achieving greater economies of scale. Notably, the Department of Defense made substantial AI-related investments in 2022-2023.
Governments / Sovereigns
Source: Pitchbook 2024 Artificial Intelligence & Machine Learning Report.
15
AI M&A Activity
AI M&A Activity Lower Middle Market
Artificial Intelligence M&A by Year
(In Billions of USD)
Total Deal Size in ($B) # of Deals
From 2020 to 2024, there has been a significant increase in the acquisition of AI startups by major tech companies, aimed at enhancing their technological capabilities and market positions. 2021 marked a significant surge in sector-specific AI investments, particularly in healthcare, where AI-powered solutions offered the promise of groundbreaking advancements in diagnostics and patient care. Furthermore, the pandemic- induced surge in remote collaboration across industries, a trend that persists into 2024, has underscored the growing demand for sophisticated AI technologies to maintain a competitive edge. From 2023 to 2024, the value of M&A deals increased by 8%. In 2024, AI-related M&A activity surged as companies sought to capitalize on the growing potential of generative AI and other advanced technologies. The AI sector is expected to witness continued strong M&A activity, driven by companies seeking to acquire new capabilities, technologies, and market access. Large tech companies like Microsoft and Alphabet are leading the charge by acquiring AI startups to bolster their own capabilities. As AI adoption continues to rise, driven by its ability to deliver tangible business value — such as cost savings and revenue growth — the M&A landscape is expected to remain active. The digital transformation accelerated by the COVID-19 pandemic has further emphasized the potential of AI to redefine workflows and drive disruptive change across industries.
97
2.2
6.3
4.6
3.1
3.3
2020
2021
2022
2023
2024
M&A Volume by Quarter
Total Deal Size in ($B) # of Deals
(In Billions of USD)
60
56
53
50
40
36
35
33 31
29
29
27
27
25
22 26 19 23
20 22
0.7 0.5 0.3 0.5 0.9 1.7 1.8 1.9 1.9 1.5 0.6 0.7 0.7 0.7 0.9 0.7 0.6 0.6 1.1 1.1
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2021 2022 2023 2024
Source: PitchBook, Forbes, Harvard Business Review, TechCrunch, McKinsey & Company.
Source: Pitchbook as of 31 December 2024.
17
Distribution of Lower Middle Market AI M&A Deals Deals over $25M increased in volume, indicating a rising confidence among investors in mid-sized transactions.
$0 - $25M $25 - $50M $50 - $100M $100M+
10%
8%
11%
11%
14%
18%
156
116
97
15%
11%
62%
65%
66%
9%
2022
2023
2024
• In 2024, 62% of AI M&A deals are still under $25 million, highlighting the emphasis investors place on gaining access to innovative technology and talent during the early stages of a company’s lifecycle. • However, there has been a noticeable shift toward mid-size AI M&A deals, particularly those valued at $25 million or more. In fact, 38% of transactions in 2024 fell into this category, up from 34% in 2023. • Although the number of deals may have decreased in 2024, the overall value of these transactions is rising, indicating a growing trend of companies prioritizing the acquisition of more significant assets. This shift reflects increased confidence in larger, strategic acquisitions designed to drive innovation and long-term growth in the AI sector.
Source: Pitchbook as of 31 December 2024. Data consists of transactions where deal value was disclosed.
18
Select AI M&A Deals in 2024 Lower Middle Market
Deal Size ($M)
Deal Size ($M)
Target
Buyer
Date
Target
Buyer
Date
17-Jul-24
150
9-Jul-24
100
17-Oct-24
150
11-Jun-24
99
2-Oct-24
139
27-Sep-24
97
24-Oct-24
136
2-Sep-24
93
26-Sep-24
130
1-Nov-24
82
1-Mar-24
119
6-Aug-24
80
Private Buyer
13-Aug-24
110
2-Oct-24
80
11-Nov-24
110
2-May-24
79
11-Jul-24
108
5-Jan-24
75
22-Oct-24
104
31-Jan-24
73
Source: Pitchbook as of 31 December 2024.
19
Select FE International Transactions
Competitive, Curated Process for GenAI Smodin receives 10 competitive offers and a successful exit
Company Overview:
Sold to
Smodin is an AI-powered writing tool that pioneers innovative solutions for students, teachers, writers, and businesses across the globe. With over 10 million users and a presence in over 180 countries, the company integrates cutting-edge AI tools to enhance productivity and creativity in content creation. Smodin came to FE International because it created a unique language-learning AI model (LLM) and wanted as competitive deal process as possible amid increased volumes of AI transactions due to the rise in popularity of other models, like Gemini. They received 10 competitive offers throughout the process.
Private Equity Firm Private Buyer
Gen AI SaaS (Content Creation)
Key Value Drivers:
Buyer Interest:
Process Results:
• Garnered 71 million website sessions in the last 12 months, demonstrating extensive user engagement and robust platform appeal • Realized compound monthly growth rates of 4% for ARPU and 3% for lifetime value • Impressive 4.6 out of 5.0 stars on Trustpilot
• 1,100+ Parties Contacted • Multiple offers received
• Smodin received 10 competitive offers for the business, meeting the owner’s expectations with a buyer able to execute seamlessly and at the right price
21
Copymatic Joins NextNet Media FE International runs selective search for Copymatic, which yielded 5 offers and its acquisition by Next Net Media
Company Overview:
Sold to
Copymatic provides advanced content generation tools tailored for marketers and writers. Through its innovative platform, users can harness AI-driven solutions for copywriting, content optimization, and audience targeting. It is competitively unparalleled in the AI writing space — it holds a distinct position among giants like Grammarly and CopyAI for boasting a laudably low plagiarism rate of 2%. FE International used its deep industry ties to orchestrated a process where Copymatic, upon entering the market, immediately garnered 5 notable bids – and totaling 12 competitive offers throughout the process.
AI Writing Software
Key Value Drivers:
Buyer Interest:
Process Results:
• Stellar momentum in the AI content generation sector, exemplified by a revenue growth of 1036% since its inception • Operational agility reflected in a solo-driven yet efficient structure • Strong financials with net margins of 54% over the LTM, surging to 63% in recent months • Consistently rising LTV of c.$140
• 100 Parties Contacted
• 12 offers received • Business sold with less than 12-months of operational history
22
AI Funding
Global AI Funding Lower Middle Market
Artificial Intelligence Funding by Year – Lower Middle Market
(In Billions of USD)
Total Deal Size in ($B) # of Deals
Since 2020, the global AI funding landscape has experienced significant growth, with mid-sized funding deals playing a crucial role in this expansion. In 2021, investments surged, driven by foundational models and the rise of AI unicorns, leading to 3,200 funding rounds compared to 2,600 in 2020. While large-scale investments like those in Databricks and UiPath in 2023 have been noteworthy, mid-sized deals have been instrumental in fostering innovation and supporting emerging AI startups. These funding rounds have laid a strong financial foundation for AI's continued growth, a trend that persists into 2024. In November 2024, global venture funding surged to $28 billion, up from $21 billion in November 2023, reflecting a steady upward trend. This growth highlights AI's growing significance in the investment landscape. Funding rounds in the lower middle market are driving innovation, supporting emerging startups, and laying the foundation for long-term growth. As AI companies scale, the sector continues to attract substantial capital, fostering innovation and ensuring sustained growth in the years to come.
1,589
14.7
20.7
19.3
12.8
12.8
2020
2021
2022
2023
2024
Funding Volume by Quarter – Lower Middle Market (In Billions of USD)
Total Deal Size in ($B) # of Deals
812 814 823 846800
757
704
682
624596 631
613
561 517 533
499
426436 374
352
3.5 3.3 3.5 4.4 4.2 5.4 5.3 5.6 5.6 5.1 4.2 4.3 3.2 3.3 3.1 3.0 2.8 3.2 3.2 3.7
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2021 2022 2023 2024
Source: Pitchbook, Fortune Business Insights, Grand View Research, and Crunchbase.
Source: Pitchbook as of 31 December 2024. Data consists of transactions where deal value was disclosed. Note: Companies valued below $150 million were considered lower middle market.
24
Distribution of AI Funding Rounds by Volume $10-$150M Deals surge, suggesting a preference for larger funding rounds
$5 - $10M $10 - $25M $25 - $50M $50M+
1%
2%
10% 1%
13%
12%
38%
45%
1,100
764
730
49%
40%
41%
48%
2022
2023
2024
• AI funding deals have shifted towards the $10M+ funding range, in contrast to the predominance of smaller deals in 2022 and 2023. While the overall number of deals has slowed, there has been a significant increase in the size of investments, reflecting a growing preference for larger funding rounds in AI. • The trend in 2024 underscores a strategic move by investors to support more robust and sustainable AI developments, reflecting a maturing market that seeks impactful technological advancements. • A significant 13% of AI funding deals are still under $5 million, signaling continued interest in new enterprises with unique offerings, like AI integrations and hardware.
Source: Pitchbook as of 31 December 2024. Data consists of transactions where deal value was disclosed.
25
Top AI Funding Deals in 2024 Lower Middle Market
Deal Size ($M)
Deal Size ($M)
Company
Date
Funding Type
Company
Date
Funding Type
14-Jun-24
100
Early Stage VC
24-Apr-24
44
Later Stage VC
24-Jan-24
75
Later Stage VC
24-Jun-24
43
Later Stage VC
15-May-24
73
Early Stage VC
23-Sep-24
43
Later Stage VC
4-Jun-24
71
Early Stage VC
20-Jul-24
42
Later Stage VC
24-Jul-24
58
Later Stage VC
19-Jan-24
40
Seed Round
4-Jan-24
57
Early Stage VC
13-Aug-24
40
Early Stage VC
1-Mar-24
52
Later Stage VC
21-Feb-24
40
Early Stage VC
4-Jun-24
51
Early Stage VC
8-Jul-24
40
Early Stage VC
4-Sep-24
50
Later Stage VC
8-Jan-24
39
Later Stage VC
30-Aug-24
50
Seed Round
11-Mar-24
39
Later Stage VC
22-Aug-24
47
Later Stage VC
25-Jun-24
38
Early Stage VC
26 Source: Pitchbook as of 31 December 2024. Note: Data includes funding rounds exceeding $5 million for companies with a valuation under $150 million.
Active AI Investors Lower Middle Market
# of AI Investments in 2024
Investor
Select Investments
74
69
58
42
39
38
32
32
30
28
Source: Pitchbook as of 31 December 2024.
27
Looking Ahead
Looking Ahead Expect major AI investments from a diversified buyer pool, including sovereign funds, venture capital funds, and even major tech corporations, who look to maintain an upper hand on the competition by incorporating new generative AI and machine learning technologies. FE International specializes in advising and assisting AI companies exploring transformative acquisitions, structuring deals, or integrating private AI solutions to help them succeed in a rapidly evolving market. That said, there are a few risks in the pipeline: • Higher Initial Costs: 50% of executives have cited costs as the largest hurdle to their company’s AI implementation. Costs related to infrastructure, data collection and AI talent acquisition can be daunting for startups and SMBs. Experts have estimated that it takes 18 months on average to fully implement AI projects, which can pose a significant risk for risk-adverse companies that may be operating with a tight budget. • Increased Regulations: Data privacy, misinformation and cybersecurity risks spur increased regulations for AI. The National Institute of Standards and Technology passed the Federal Artificial Intelligence Risk Management Act of 2023, which directs federal agencies to use an Artificial Intelligence risk management framework. • Need for Private AI: AI algorithms are trained to use customer information, causing data privacy concerns. Industries in the public sector, life sciences, and financial services will look to minimize data breach risk by limiting public AI usage and search for vendors who can offer private AI. M&A activity in the AI sector is surging, with deal sizes ranging from $10 million to $100 million as investors recognize the immense growth potential of emerging companies. As organizations globally embrace AI to enhance productivity and efficiency, M&A activity in the sector is projected to remain robust. With decades of experience, FE International assists AI companies in optimizing operations, crafting compelling investor narratives, and navigating the complex M&A process.
29
Behind this Report
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Aksh Patel Associate Since 2021, Aksh Patel he has been involved in transactions across FE International. He focuses on technology, AI, digital services, and digital media sectors. He previously worked in telemedicine and equity research. linkedin" Icon - Download for free – Iconduck
Ismael Wrixen Executive Chairman
Ismael Wrixen is the Executive Chairman of FE International and the CEO of ThriveCart. He is a member of the Forbes Finance Council and a NACVA 40 Under 40 Award winner. Before FE, Wrixen was in large-cap M&A investment banking, where he executed several high-profile public deals, namely in the technology sector.
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Thomas Smale Chief Executive Officer
Thomas Smale dedicates his career to helping founders get acquired on their terms. He built FE into the leading advisor for lower middle market technology businesses. FE's team has completed over 1,500 transactions with a combined value of over $50 billion. Thomas offers invaluable technical, diligence, and negotiation advice to early-stage and seasoned business owners alike.
Kanika Arora Analyst
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Kanika Arora has 3+ years of experience and has over $4 billion in combined deal value across her career. Her focus is the Diversified Industries & Transportation vertical, covering chemicals, capital goods, transportation, A&D, and the airlines sector. Previously, she was an IB analyst at J.P Morgan in M&A, IPO, and shareholder activism space.
Randal Stephenson Head of Investment Banking
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Randal Stephenson has over 25 years of experience in both M&A advisory and debt and equity capital raising. He has closed over 300 transactions valued at $44 billion across 22 countries. Before FE, he held senior investment banking positions at Merrill Lynch, Jefferies, CIT Group, and Duff & Phelps.
30
About FE International
Founded in 2010, FE International is an award-winning strategic advisor for technology businesses. With a proven track record of success in this space, FE International offers a comprehensive suite of services which include:
• Investment Banking: Investment banking built for the lower middle market including M&A, private capital placement, and valuation services provided by FE Capital Markets. • Private Sales & Acquisitions: Buy or sell privately held technology businesses with our seasoned team.
• Due Diligence Services: Gain a clear, strategic view of a company’s financials and operations with our comprehensive due diligence services. • Early-Stage Funding: Streamline your capital raise in partnership with Funden, a managed fundraising service for busy founders.
1,500+ Transactions completed on behalf of clients 1
$48M Average Transaction Value
70% + Percentage of Sell-Side Transactions
Percentage Completed Transactions 2 94.1%
Sector Expertise
FinTech
SaaS
Ecommerce
Artificial Intelligence
Agency & Marketing Solutions
Marketplace Apps
Education Technology and Online Training
Cybersecurity
Source: Company data. 1. Includes approximately 300 transactions completed by FE professionals while at other firms. 2. Sell-Side transactions, measured from the date of launch of buyer outreach and marketing.
31
London, UK
Warsaw, Poland
New York, USA
San Francisco, USA
Miami, USA
Mumbai, India
Awards:
Featured in:
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