Tech M&A takes tentative steps forward

11 August

Tech M&A takes tentative steps forward

M&A in the US technology, media and telecom (TMT) space was dealt a blow by COVID-19 after a strong start to 2020. Dealmaking dropped to US$123.7 billion between January and July this year, down from US$181.4 billion for the same period last year, and US$210 billion for the same period in 2018.

While M&A activity hit a nadir in April, when stock markets cratered and buyers hit the pause button, there was a clear resurgence in June when nationwide lockdowns eased and hopes for a vaccine rose.

And as the bosses of the biggest tech companies in the US faced Congressional accusations of being “emperors of the online economy” and “cyber barons,” Mergermarket data shows that Alphabet, Amazon, Apple and Facebook were among the busiest acquirers in this otherwise quiet period.

Amazon acquired autonomous driving company Zoox in June for what was reportedly less than its US$3.2 billion valuation during its funding round in 2018. Apple made several small acquisitions, buying device management software firm Fleetsmith; virtual reality startup NextVR; weather forecasting app Dark Sky; and the AI software startups Inductiv, Voysis and

Meanwhile, Alphabet’s Google acquired Canada-based North for its smart glasses business; Netherlands-based Cornerstone Technology to bolster its cloud platform; and Dublin, Ireland-based local retail technology company Pointy.

Facebook’s string of acquisitions included game developer Ready At Dawn Studios for its Oculus VR virtual reality headset business; GIF file maker Giphy for its Instagram subsidiary, and Malmö, Sweden-based Mapillary, a provider of crowdsourced street-level imagery for improving maps.

Big tech looks to the future

At a time when these four companies face domestic pressure from lawmakers for being too dominant, looking abroad for deals is proving attractive. Facebook and Google both made investments in India, where they are betting big on the digital transformation journey in the world’s second most populous country.

In June, Facebook paid US$5.7 billion for a close to 10% stake in Indian telecom giant Jio Platforms, a subsidiary of Reliance Industries. Google followed suit in July, investing US$4.5 billion in Jio for a 7.7% stake, via its US$10 billion India Digitisation Fund.

Dealmakers now are cautiously optimistic for the second half of the year, with reasonably healthy levels of M&A expected in the months ahead.

M&A will be influenced by the trend towards remote work, digital events and virtual healthcare. Cloud computing, business software, e-commerce platforms, connectivity technology and IT security—all areas in high demand during the pandemic—are expected to see heightened M&A activity.

The tech Big Four, who escaped relatively unscathed from their grilling in Washington, should remain active too, but it may be that big markets beyond US borders attract greater attention.