Zombie Companies Hook Up to Survive the Startup Winter
The merger of former SPACs may only delay a financial reckoning.
Will 2023 be the year of corporate zombie marriages? With a recession looming and investors suddenly reluctant to fund companies that don’t make money, I expect cash-strapped private startups, recent tech initial public offerings and former special purpose acquisition companies will try to save their skin by merging with other startups.
Coupling with another loss-making young firm might seem an improbable route to salvation. Yet such deals can offer the acquirer a cheap way to increase market share or gain economies of scale; meanwhile the target gets cash to keep the lights on. However, mergers are no substitute for cost-cutting and healthy unit economics — and they won’t fix broken business models.