TITLE: European AI Acquisition Wave Reshapes Tech Landscape as Startups Become Strategic Assets
M&A Activity Reaches Unprecedented Levels
The European artificial intelligence sector is experiencing a significant transformation as merger and acquisition activity reaches record-breaking levels. According to recent data, AI exits hit monthly highs of 18 and 15 in July and August respectively—the highest totals recorded since data collection began. This surge represents a fundamental shift in how both established corporations and scaling startups are approaching market expansion and talent acquisition in the competitive AI landscape.
Bruno Raillard, cofounder of Paris-based VC Frst, notes that “These ‘frontier AI’ companies are exotic animals with a surface of problems to resolve that is much larger than a typical startup. They have projects that go beyond simple software, with lots at stake when it comes to recruitment and infrastructure.” This complexity is driving the need for diverse growth strategies, including strategic acquisitions.
High-Profile Deals Signal Market Maturation
Several landmark transactions have highlighted the growing value of European AI expertise. Sweden’s Sana exited to US giant Workday for $1.1 billion in September, while Germany’s Cognigy was acquired by US corporate NiCE for $955 million. UK-based Convergence was picked up by Salesforce, demonstrating the global appeal of European AI innovation. The European AI sector sees surge in acquisition activity as companies seek to rapidly enhance their capabilities.
Thomas Otter, general partner at Acadian Ventures, explains the corporate perspective: “The large, established publicly listed vendors in enterprise software have significant treasure chests. These vendors are looking for native AI plays to put additional product credence behind their marketing messages—they have the sales machines, they can easily add more AI products to the kit bag.”
Scaleups Become Active Acquirers
In a notable trend, well-funded AI startups themselves are becoming significant acquirers. French AI darling Mistral, which recently raised a €1.7 billion Series C, has made M&A a strategic priority, publishing job ads for roles “pivotal in advancing Mistral’s M&A activities.” The company has had initial talks with at least one potential target, according to sources familiar with the matter.
Compatriot Poolside is similarly building out its M&A capabilities, hiring former Citigroup banker Philip Drury as chief investment officer. Drury brings nearly three decades of experience having advised on mergers worth hundreds of billions of dollars. These developments reflect broader industry developments where scaling companies use acquisitions to accelerate growth.
Corporate Giants Bolster AI Capabilities
While AI startups are increasingly active in M&A, the majority of deals announced so far have been executed by established corporate giants seeking to rapidly enhance their AI offerings and acquire specialized talent. Cybersecurity leader Check Point recently announced its acquisition of Swiss startup Lakera, which builds security tools for agentic AI applications, in a deal reportedly valued at $300 million.
Manjari Chandran-Ramesh, partner at Amadeus Capital Partners, observes that “We’re seeing consolidation among mid-revenue AI software players—clusters of similar-sized vendors getting picked off as buyers prioritize proven tech with enterprise deployment. The most active targets are mid-revenue enterprise AI software at around $6m-20m ARR, especially those in LLM tooling and model lifecycle and reliability.” These strategic moves align with related innovations across technology sectors.
Transatlantic Deals and Sovereignty Concerns
European AI startups have become particularly attractive targets for US corporations seeking technological edge at more reasonable valuations. Pierre-Louis Cléro, partner at global law firm Latham & Watkins, notes that “We’re seeing US companies coming to shop in Europe. These players look at their home markets and prices are pretty high. So if they find a technology that makes sense in Europe, they have every interest to buy.”
However, as European AI companies grow larger, M&A deals could face increasing regulatory scrutiny. Callum Stewart, principal at investment manager Bullhound Capital, suggests that “I just don’t see where the exits come from at those valuations because the only people that can pay the price are US and Asian companies. But there is the sovereign angle, which means it will be very hard to prize these companies out of their own countries.” This reflects broader market trends where strategic assets face protectionist pressures.
Strategic Rationale Behind Acquisition Spree
The driving forces behind this M&A wave are multifaceted. Uljan Sharka, CEO and cofounder of Italian startup Domyn, explains that “To meet the expectations of enterprise clients, incremental progress in AI products is no longer sufficient. M&A helps businesses move faster, whether by accelerating product development, deepening expertise or supercharging go-to-market momentum.” Domyn is currently fundraising for a €1 billion round to support its growth strategy, which includes targeted acquisitions.
The acquisition approach extends beyond technology to encompass talent acquisition, as demonstrated by US AI lab Anthropic’s acqui-hire of cofounders and employees from UK-based startup Humanloop in August. This focus on specialized talent reflects how recent technology sectors increasingly compete for human capital.
Future Outlook
With 98 M&A deals for European AI startups already completed this year—surpassing the 85 acquisitions recorded across all of 2024—the pace shows no signs of slowing. Industry observers expect further consolidation as well-funded players continue to seek competitive advantages through strategic acquisitions.
Cléro suggests that while transatlantic operations already face sovereignty concerns, “It’s a barrier because buyers must consent to some commitments, they have to be familiar with the challenges, but in reality there are few examples of such operations being blocked. Whether things are going to evolve toward a stricter M&A environment remains to be seen but it is possible.”
As the European AI ecosystem continues to mature, the interplay between innovation, investment, and strategic acquisition will likely define the continent’s position in the global AI race, with M&A serving as both exit strategy and growth accelerator for the region’s most promising technology companies.
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