Why haven’t there been more unicorn mergers?

Last year was a massive year for mergers, with industry giants like Dell and Aol finally closing deals that were large enough to make 2015 a record-breaking year. Predictions mostly held that 2016 would be another huge year for mergers, as they are one of the best ways to continue growing share price after a prolonged bull market.

That’s why it’s been somewhat surprising that five months into the year we’ve seen relatively few mergers, particularly within tech, where you would think that struggling unicorns would make attractive targets. Even companies like Yelp, which at one point were quite vocal about seeking buyers in 2016, going so far as to hire Goldman Sachs to line up suitors, decided early this year to change tack. Here are a few possibilities as to why more unicorns aren’t partnering up.

Private companies have a harder time merging

Part of the reason we havent seen many mergers amongst Silicon Valley’s unicorns is structural: Private companies have a harder time pursuing mergers than publicly traded ones. A lot of it boils down to valuation; it’s much harder to determine whether a union between two companies is a marriage of equals when their value is largely subjective — one company might have better margins, but one might be growing faster. With companies staying private for much longer, it’s getting harder to suss out potential targets.

Acquiring is more expensive now

The economy has also done well for the last couple of years, which has made it harder for larger companies to acquire smaller ones. The Russell 1000, which tracks smaller companies, trades at 18 times its 12-month earnings forecasts, up from 16.5 last year.

Looking at technology companies in 2016 through a 2000-lens is like comparing apples and oranges.

The Federal Reserve has also raised interest rates, and will likely do so again, making it more expensive to borrow money. One of the biggest acquisitions this year was Air Alaska’s takeover of Virgin Atlantic, where the former is expected to pay about $2 billion in the deal, well above Virgin’s market cap of $1.5 billion. Despite the price tag, the deal was well-received, suggesting that we might see more acquirers paying a premium for the right target.

Deals get more scrutiny

This is all another way of saying that potential deals are getting more scrutiny: There’s a higher bar that needs to be met for timing, terms and price. But the government has also been more aggressive in putting a stop to deals that eschew local taxes or represent potential monopolies. There is actually historical precedent for political activity hampering business activity, mergers and acquisitions typically decline in election years. There’s been no shortage of drama on the campaign trail this year, and it’s possible that a lot of decision-makers are waiting until 2017 before making any major changes.

Echoes of 1999?

The last noteworthy spike in technology mergers came back in 1999, an association that might not be doing anybody any favors. When Time Inc. publicly mulled over buying Yahoo!, many noted that the partnership would have been very similar to the merger between Aol and Time’s parent, Time Warner, back in 2000, a deal widely regarded as “disastrous” for both parties.

However, the prospects for media and technology companies to engage in meaningful partnerships is a great deal more developed than it was 15 years ago. Despite some dire warnings that 2016 would vanquish unicorns, it hasn’t really; the amount of capital going into high-growth companies may have stopped growing as fast, but it’s still high at north of $12 billion for the first three months of 2016. Looking at technology companies in 2016 through a 2000-lens is like comparing apples and oranges.

Aside from Seamless and GrubHub, which must contend with the hyper-competitive food delivery category, there havent really been very many notable mergers amongst the unicorn cohort. However, if founders can get over their valuation concerns and investors can shake off an understandable, but misguided sense of déjà vu, for a lot of reasons it’s not too late for 2016 to turn its act around.