04 Mar 2021
Posted in Business Fundamentals
Deal activity in AI space showcased growth during 2016-2020 despite fluctuating Y-o-Y trend, says GlobalData
Venture capital (VC) funding and mergers and acquisitions (M&A) activity in the artificial intelligence (AI) space showcased a fluctuating trend during 2016-2020. However, despite the fluctuation in deal activity, there is a significant growth in 2020’s deal volume and value compared with 2016, according to GlobalData, a leading and data analytics company.
VC funding deal volume in the AI space showed consistent growth from 2016-2019 until 2020 when the COVID-19 pandemic reversed the trend and deal volume shrank by 7.1%. However, funding value managed to maintain the growth trajectory.
On the other hand, M&A deal volume registered consistent growth during 2016-2020, while M&A deal value continued to fluctuate. After recovering from the decline in 2017, M&A deal value registered growth in 2018 and 2019 before declining again in 2020.
Despite the fluctuation in deal activity, there is a notable growth when comparing 2020 numbers with 2016. VC deal volume and value increased at a compound annual growth rate (CAGR) of 19.4% and 39.9%, respectively, during 2016-2020. On the other hand, M&A deal volume and value increased at a CAGR of 44% and 5.6%, respectively, during the past five years.
Aurojyoti Bose, Lead Analyst at GlobalData, comments: “Despite the fluctuating trend, investors’ interest and deal-making sentiments for AI grew significantly in the past few years. With global organizations replacing their conventional operations with disruptive technologies such as AI, the space managed to gain a significant investment boost.”
VC deal volume in the AI space shrank by 7.1% from 3,075 in 2019 to 2,856 deals in 2020. Despite the decline in volume, the COVID-hit 2020 saw the announcement of some big-ticket VC deals due to which deal value increased by 18.7% compared to 2019. Some of the notable VC deals announced during 2020 included US$1.9bn secured by SpaceX and US$1.7bn secured by Manbang Group.
Bose adds: “Though COVID-19 did not deter M&A activity in the AI space from taking place and deal volume increased in 2020 compared to 2019, distressed valuation of assets appears to have lowered the deal value.”
The number of M&A deals in the AI space grew by 6% in 2020 compared to 2019. However, the corresponding value shrank by 17.3%. While 2019 saw the announcement of around 60 US$100m+ deals, 2020 saw the announcement of around 50 US$100m+ deals.