Antitrust Enforcement Over-deters Acquisitions, Squeezing Smaller Startups and Venture Capital Investors

January 24, 2025

Susan E. Woodward

A "process is the punishment" antitrust enforcement regime from mid-2021 through 2024 over-deterred acquisitions, significantly impacting venture-backed startups and venture capital investors. This "merger tax" led to a sharp decline in acquisitions of smaller startups that can't IPO. The result: reduced exit multiples, increased shutdowns, and constrained venture capital returns. This dynamic undermines innovation, particularly in AI startups, which comprised a third of venture capital deals in 2023, and risks broader economic and security risks from impaired U.S. tech leadership.

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