Good morning.
The deals pipeline has been pretty dry lately. But sometimes, there are unexpected deal opportunities that present themselves and both buyer and seller seize the moment. Take for instance a chance meeting between two CEOs, who have a lot in common, and that resulted in a blockbuster A.I. deal.
That’s the story my finance colleague Luisa Beltran tells in her exclusive piece, “Databricks wasn’t looking to buy, and MosaicML wasn’t selling. How two CEOs navigated a blockbuster $1.3 billion A.I. deal.”
“Two founders—Ali Ghodsi, 44, the chief executive of Databricks, and Naveen Rao, 48, MosaicML’s CEO—met, realized they have lots in common, and in warp speed came to combine their companies,” Beltran writes. “Databricks is a data-analytics company that employs more than 5,500 people and was valued at $38 billion in 2021. MosaicML, by comparison, was launched two years ago, has 62 employees.”
Although the company sizes are different, the two had the same goal in mind. “They wanted to democratize A.I. and enable lots of people to have access to these models,” Beltran writes. “But both knew security was a big issue for their customers, and neither was interested in building a consumer app.”
Ghodsi and Rao knew of each other for a long time but didn’t actually meet in person until they both attended the Cerebral Valley conference, an A.I. summit in San Francisco on March 30 that included some of the biggest names in the industry.
A conversation during a VIP dinner after the conference laid the foundation for a potential deal between Ghodsi and Rao.
“The meeting piqued Ghodsi’s interest,” Beltran writes. “Rao is very well-known in the A.I. community, having sold his first company, Nervana Systems, to Intel in 2016 for $408 million. When he left four years later, in 2020, Rao was Intel’s top A.I. executive. But in late March, Databricks wasn’t necessarily looking to buy anything and MosaicML was definitely not interested in selling, Ghodsi said.”
You can read more here about how Ghodsi and Rao eventually changed their minds, and the ins and outs of a complicated deal that came together in less than two months.
I recently had a conversation with Neil Dhar, PwC’s vice chair and U.S. consulting solutions co-leader, about the state of M&A. “I’d say right now, CEOs and dealmakers are looking at any path to grow, make their companies more efficient, and balance that with risk,” Dhar told me.
He shared four key trends likely to drive M&A in the coming months, like the necessity for business reinvention. More companies are using deals to transform business models and respond to an evolving marketplace, such as increasing digital capabilities and A.I., expanding supply chains, or incorporating ESG into their portfolios, Dhar explained.
And sometimes, all it takes is a chance meeting to spark a deal that may change the trajectory for both the buyer and the seller.
Sheryl Estrada
sheryl.estrada@fortune.com
