Tech Acquisitions: Who Are the World’s Biggest Empire Builders?
Date: 29 March 2016 Share on Twitter Share on Facebook
A year for the record books
2015 was a bumper year for tech acquisitions, with a record of 4,400 M&A deals taking place- up 23% from 2014- worth over $600 billion. Big-time tech player Dell also completed the largest tech acquisition of all time, purchasing data storage company EMC for $67 billion.
Last year, more than ever before, tech companies were spurred on to make more expensive and more frequent acquisitions. There seems to be a continuous presence of FOMO (fear of missing out), with businesses prepared to take expensive punts on smaller companies in the hope that their new acquisitions will give them a decisive edge over competitors.
Interestingly, for all the positives for M&A in 2015, it appears that the usual empire-building suspects were less prominent than normal.
While their inferior counterparts have gone giddy over the past months, many of tech’s most prolific empire builders have sat out the purchasing party recently. Five of the eight major tech players cut acquisitions in 2015: Yahoo’s single purchase last year marked an astonishing reduction from the 35 completed in 2014.
Google cut back to 16, down from 35 in 2014, while Facebook made just five acquisitions in 2015, three less than in the previous year. Apple and Twitter also made fewer additions compared to the year before.
Experts cite soaring valuations and the slump in the IPO market as two major deterrents for larger companies. These obstacles still remain: it is estimated that fewer companies have been listed globally during the first three months of 2016 than during any first quarter since 2009, meaning slim pickings for merger-hungry firms.
Of the eight tech giants, Microsoft took the top spot for acquisitions 2015 with 18 purchases, adding mobile tech companies Sunrise, Accompli and Swiftkey to their digital empire. Amazon and Salesforce also upped their M&A activity in the past 12 months.
Global acquisitions – out of this world
Despite a quiet spell for Silicon Valley’s elite, the tech M&A market has many other keen players around the globe. According to Baker & McKenzie, the next two years will see a rising number of mergers, acquisitions and IPOs in the world. It is predicted that there will be around 250 M&A deals per year in South-East Asia from 2020, alone. The overall global market might grow by a dozen trillion US dollars.
This is largely due to three major trends: one – many companies in Europe and the US have more spare cash to buy other companies; two – financing capabilities of private equities around the world have improved, and three – emerging markets and smaller economies are adding to the growing number of deals.
The number of ad tech deals specifically is also mounting, with RNTS purchasing Inneractive this month for up to $72 million. The ad tech sector will look to meet the heights of the previous two years, where acquisitions as valuable as $4 billion took place when Verizon bought AOL last July.
There are mixed forecasts for the coming year. On the one hand, some claim that the strong dollar will incentivize further tech deals in 2016 and even pave the way for a return to business as usual for the Big 8.
On the other hand, a combination of weak economic growth and volatile global markets is predicted to lead to spending cuts in companies, meaning less capital available for empire building.
Should the big names decide to resume acquisitions at a high rate, likely areas of interest for most will include data security, business software, and the shift to cloud-technology. Google, in particular, is expected to make a swoop for a cloud-computing company, such as Docker or Mesosphere.
Others will look for deals which will fit in with the ethos of their brand- Apple are being tipped to approach Adobe, GoPro or Box over the next 12 months.
Whoever the target, the potential to add value, innovation and breadth to their company means acquisitions are undoubtedly still a large incentive for digital empires. Don’t expect the big guns to be off the pace for long.