Prior to 2022, it seemed like every other startup on the market was going public. But during 2022, as the Fed aggressively raised interest rates to curb inflation, the trend reversed. Global IPO volumes fell 45% year-over-year, according to data from Ernst & Young.

In the short term, the decline of startups going public makes sense: The economy was thrown into disarray by the pandemic and the war in Ukraine, and we’re still seeing the aftershocks work their way through supply chains, the global workforce, and more. Add in the disappearance of cheap money, and it’s currently no longer an IPO-friendly environment for many companies.

But a new paper, “The Great Startup Sellout and the Rise of Oligopoly,” shows that despite a relatively recent uptick in IPO activity, what we’re witnessing is actually a longer shift: Fewer companies are going public, more are being acquired, and that’s likely part of a big-picture strategy by established companies to insulate themselves from would-be competitors.

The study’s authors—economist Florian Ederer from Yale School of Management and assistant professor Bruno Pellegrino from University of Maryland’s Robert H. Smith School of Business—conclude that the trend is “accompanied by” an increase in the opportunity costs of going public, and the result is an increase in oligopoly power.

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