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In this episode #40, we talk with Blake Hutchison, CEO of Flippa, the biggest marketplace for buying and selling online businesses.

M&A Trends and Predictions for 2024

As we look ahead to 2024, the mergers and acquisitions (M&A) landscape is poised for significant shifts. According to Blake Hutchison, CEO of Flippa, the largest marketplace for buying and selling online businesses, there are a few key trends and predictions to keep an eye on.

Firstly, buyers are actively seeking out opportunities to drive inorganic growth, looking to acquire businesses that can complement their existing operations. On the other hand, sellers are increasingly seeking liquidity, driven by a range of factors. Some venture-backed businesses are facing a market crunch and need a pathway to exit, while others may not be growing at the expected pace, prompting the need for a strategic sale.

Interestingly, Hutchison notes that the digital asset class that Flippa operates in, which typically involves businesses with less than $10 million in revenue, has not experienced the same level of valuation inflation as the broader startup and tech ecosystem. “Valuations have remained steady and they’ve remained steady because it was never an overvalued asset class to begin with,” he explains.

Looking ahead to 2024, Hutchison predicts that we will see an influx of businesses seeking to exit, particularly those that are venture-backed and struggling to raise additional capital. “VCs all over the world will double down on the stars in their portfolio and they’ll exit the dogs in their portfolio, and so the dogs have to find a pathway – it’s either shut down or exit through a trade sale,” he says. This presents a significant opportunity for buyers, but Hutchison cautions that Founders may face less favorable outcomes than they had anticipated.


Improving Business Transactions with AI

One of the key ways Flippa is revolutionizing the M&A landscape is through the integration of AI-powered technology. Hutchison explains that Flippa’s platform leverages graph neural networks to create a highly efficient matching process between buyers and sellers. 

The platform’s AI-driven approach analyzes clusters of customers on both the buy and sell sides, identifying relationships and recommending the most relevant deals to each buyer. This has resulted in Flippa being able to facilitate around 400,000 matches per week, significantly streamlining the deal flow process.

“What we’re trying to do is two things: we’re obviously trying to find you the right buyer, we’re also trying to get deals done quicker,” Hutchison says. By using AI to match buyers and sellers more efficiently, Flippa has been able to facilitate deals within weeks, rather than the traditional six-month timeline.

However, Hutchison is quick to note that AI-powered matching is not a replacement for the critical role of brokers and M&A advisors. Instead, Flippa’s approach is to create a “managed marketplace” where the platform handles the aspects of the process that can be automated, while the human experts handle the more nuanced tasks, such as communicating with buyers, validating their capabilities, and negotiating the deal terms.


How to Stand Out on

In a competitive M&A landscape, Founders looking to sell their businesses on Flippa need to find ways to make their offerings stand out. Hutchison highlights a few key strategies:

  1. Operational and Financial Maturity: The businesses that tend to perform best on Flippa are those that have strong, predictable financials, well-documented standard operating procedures, and healthy gross margins. These “boring” businesses in established industries are often more appealing to buyers than speculative, high-growth startups.
  2. Pricing Strategy: Hutchison advises Founders to use Flippa’s benchmarking data to price their businesses near the top of the industry range, but then be willing to negotiate. Avoid overpricing, which can scare away potential buyers.
  3. Storytelling: Producing materials that showcase how the business operates and the value it provides can help Founders stand out. Flippa often features “seller interviews” to give buyers a behind-the-scenes look at successful businesses.

While AI-powered technologies like Flippa’s matching engine are gaining traction, Hutchison notes that the impact of AI on the businesses listed on the platform has been relatively limited so far. “Most buyers who are interested in Flippa are looking for businesses that have historically operated well, and if it’s historically operated well, it’s less likely that AI has had an impact on that business yet,” he explains.


The Impact of AI

As for the role of AI in the M&A space, Hutchison believes that while it has been a “Shiny Bright Light” in the venture capital world, it has not yet had a significant impact on the types of businesses that typically sell on Flippa. He notes that the average business on the platform is around 4.5 years old, and buyers are more interested in predictable, cash-flow-positive businesses than speculative, high-growth startups.

That said, Hutchison encourages Founders to consider how they can leverage AI and other technologies to drive operational efficiencies in their businesses. He suggests that Founders should be prepared to discuss any AI-powered initiatives or integrations during the exit process, as they can demonstrate the business’s forward-thinking approach. However, he emphasizes that the core drivers of a successful exit will still be the company’s financial and operational performance, rather than the use of cutting-edge technologies.


Building a Knowledge Base

Recognizing the need for more education and transparency around the M&A process, Flippa has made a concerted effort to build a robust knowledge base for Founders. Hutchison highlights a few key initiatives:

  1. The Exit Podcast: This podcast features stories from Founders who have successfully bought and sold businesses, providing valuable insights into the preparation, valuation, and negotiation aspects of the exit process.
  2. Data and Valuation Insights: Flippa encourages Founders to explore the platform’s data on similar businesses, which can help them benchmark their own performance and pricing against industry standards.
  3. Content and Database Journalism: Flippa is investing in producing more content and data-driven insights to help Founders understand the intricacies of how businesses are valued and transacted in the digital M&A space.

Hutchison emphasizes the importance of Founders understanding the buyer’s perspective and the metrics that are most important to them, rather than relying on their own assumptions about the value of their business. By providing these educational resources, Flippa aims to empower Founders to approach the exit process with a more pragmatic and informed mindset.

As the M&A landscape continues to evolve, platforms like Flippa are playing a crucial role in facilitating efficient and successful transactions. By leveraging AI-powered technologies, building a strong knowledge base, and fostering a supportive community, Flippa is helping Founders navigate the complexities of exiting their SaaS companies in 2024 and beyond.

Head of Growth,