On October 4, 2023, U.S. Federal Trade Commission Chairman Lina Khan and Jonathan Kanter, Assistant Attorney General of the Antitrust Division of the Department of Justice, participated in a discussion on antitrust reform at the Brookings Institution in Washington .
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Google Has been in talks to acquire a marketing software maker pivot point earlier this year, but no deal was reached. Later, the company acquired cybersecurity startup Wiz. But that didn’t happen either.
Google took a different tack when it came to closing one of its recent notable deals. follow the pattern pursued Amazon and Microsoft In order to attract experts in the field of artificial intelligence, Google announced last month that it would hire the founder of Character.AI, a new generative artificial intelligence startup. Instead of outright acquiring Character and shutting it down (a standard acquisition tactic), Google kept the startup alive and into a License agreement Because of its technology.
This is the new world of technology M&A. Under the Biden administration, and more specifically FTC Chairwoman Lena Khan, the largest companies have been stymied in pursuing big deals. In some cases, they even walked away from smaller deals. Amazon abandoned its $1.7 billion acquisition of iRobot in January after the Federal Trade Commission and European regulators raised concerns.
Tech deal volume has plummeted since peaking at $1.5 trillion in 2021, falling to $544 billion last year, according to Dealogic. So far in 2024, this number has reached $465 billion.
In technology, private equity buyers are the ones who keep the market functioning. July, BlackRock Agree to purchase data provider Precin Two months ago, Permira announced it would acquire website building platform Squarespace for nearly $7 billion. Thoma Bravo, a leading technology acquisition firm, said in July sales structure Acquired KKR for $4.8 billion.
Don’t expect much to change for the rest of the year. With the November presidential election approaching, the regulatory environment may change, potentially resulting in the removal of transaction barriers.
However, neither side has given much clear information about what will happen in the future. Donald Trump’s Republican running mate, Sen. JD Vance, has commend Khan, who has instituted stricter rules on mergers, told CNBC last week that “there should be an antitrust solution” to some of the behavior of big tech platforms.
On the Democratic side, billionaire donors Barry Diller and Reid Huffman expressed concerns about Khan keeping his job if Vice President Kamala Harris wins.
“If Trump wins, I think the regulatory environment will still be quite challenging, and in a challenging regulatory environment, that will just limit the big deals,” said Andrew Lu, a partner at a law firm that represents startups in mergers and acquisitions. Andrew Luh said.
The Biden administration’s crackdown on Big Tech goes far beyond clamping down on mergers and acquisitions.
Alphabet is in its second antitrust trial after the Justice Department accused it of monopolizing search and advertising. U.S. Department of Justice files lawsuit apple in March on antitrust grounds. Cases pending before the Federal Trade Commission (FTC) Yuan and Amazon.
Coupled with an equally dire environment in Europe, it seems that no deal is safe. December, adobe Abandoned a $20 billion agreement to acquire design software startup Figma and paid a $1 billion breakup fee. in a statementThe companies said there was “no clear path to obtaining the necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.”
July, Figma explain It has completed a tender offer valuing the design software startup at $12.5 billion. When the Figma market finally reopens, it’s seen as a strong IPO candidate. But as the M&A market tumbles, IPOs also enter a prolonged drought as companies continue to adapt to sharp declines in valuations caused by an economic slowdown that begins in 2022.
A Figma spokesperson declined to comment on the company’s plans.
Dana Rao, Adobe’s general counsel at the time, declare He left the company earlier this month after 12 years. Rao said in an article Interview in December Adobe leadership felt it justified continuing to pursue Figma after its competing product design project failed. But regulators take a different view.
“We have had a lot of interactions with regulators who are very concerned about new doctrines in antitrust law that consider future competition to be a key part of the antitrust analysis,” he said.
Jonathan Kanter, head of the U.S. Department of Justice’s antitrust division, said in a statement statement Adobe backed down, saying the move “ensures designers, creators, and consumers continue to benefit from future competition between the two companies.”
“Very very disciplined”
There are still deals going on outside the regulatory oversight.
Hewlett Packard Enterprise Agree to acquire network hardware company in January juniper berries for $14 billion. And this month, salesperson Said it would acquire the start-up company Own for US$1.9 billion.
In these cases, management is less concerned about regulators and more concerned about how shareholders will respond after a 2022 downturn due to a growing obsession with profitability.
Antonio Neri, President and CEO of the American company Hewlett Packard Enterprise, speaks at the Mobile World Congress (MWC), the telecommunications industry’s largest annual event, in Barcelona on February 27, 2024.
Paul Barrena | AFP | Getty Images
HPE CEO Antonio Neri told CNBC that Juniper will increase non-GAAP earnings in the first year.
“We’ve been very, very strict on returning invested capital, which means every dollar spent has to deliver value to our shareholders,” Neri said in an interview. “That’s why, taking Juniper as an example , we are committed to achieving a range of synergies that exceed the capital cost of this acquisition.”
Neri told analysts in January that the two companies operate in some of the same markets but in different verticals, and said he did not expect a protracted battle with regulators. In August, the UK Competition and Markets Authority officially recognized cooperation.
Sergio Letelier, head of corporate development at HPE, said that when he and his team members advise Neri on a potential deal, they always discuss how regulators might treat the deal. Although some deals are taking longer to close than before, “the fundamentals of questionable deals versus non-issued deals haven’t changed,” Letellier said.
Salesforce CEO Marc Benioff said Own should be accretive to free cash flow in the second year after the deal closes. It’s Benioff’s first acquisition worth more than $1 billion since 2021, when the cloud software provider paid $27 billion for Slack, its largest acquisition ever. The U.S. Department of Justice’s antitrust division requested more information about the deal before approving it.
In an interview last week, Benioff called U.S. regulators “somewhat dysfunctional” but praised Europe for recognizing where competition is really being harmed. He pointed out one in particular recent discoveries The European Commission, the EU’s executive arm, believes Microsoft violated antitrust rules by bundling its Slack rival Teams with its core Office productivity app.
“They are the ones who are really making a difference and working hard,” Benioff said of the EU and Britain. “I think it’s a big deal that we’re following the Europeans in this regulatory environment.”
Since acquiring Slack, Salesforce has only pursued smaller deals, especially after a standoff with activist investors forced the company to refocus on profitability. Salesforce has attracted artificial intelligence talent by purchasing Airkit and Spiff’s Sales Cloud software add-ons.
“We’ve done over 60 acquisitions,” Benioff said. “We’ve tried and failed a lot at M&A, but we’ve also had quite a bit of success, especially with the big ones.” Before Slack, Salesforce acquired Tableau Software and MuleSoft.
It’s hard to have confidence
exist CiscoDerek Idemoto, the networking hardware company’s director of corporate development, said one of the first questions executives ask when evaluating a potential deal is how certain they are that the deal will be completed.
“The question is, given how difficult the situation is and how likely litigation is, how much regulatory risk are you willing to take,” Idemoto said.
Idemoto said this has led Cisco to become more selective now. Last September, before the company announced its $27 billion acquisition of data analytics software company Splunk, he said he believed the risk was definitely worth taking. Splunk sits comfortably outside the core of Cisco networking equipment.
“Of course, it’s an offensive game for us,” Idemoto said.
The deal went through smoothly and even closed in March, six months ahead of schedule.
“Signing something with a high degree of confidence — that’s the Cisco way,” Idemoto said.
This level of confidence will be difficult to achieve as long as the FTC and DOJ actively focus on large corporations. Alphabet’s last big deal was its $5.4 billion acquisition of cybersecurity company Mandiant in 2022. and engaged in protracted battles with U.S. and European regulators. Amazon has not struck a deal worth more than $1 billion since completing its $3.9 billion acquisition of One Medical in early 2023.
Last month, Amazon declare It recruited a quarter of its staff from Covariant, a company that builds artificial intelligence models for robots. This is the company’s second AI deal in terms of acquisitions, following a similar deal with Adept in June. Even the deal prompted an informal investigation by the Federal Trade Commission.
Amazon did not comment specifically on the matter but said acquisitions remain part of its growth strategy and “are a critical and healthy part of the innovation economy.” Microsoft declined to comment, and Google did not comment for this story.
HPE’s Letelier said it’s difficult for any tech company considering an acquisition strategy to predict the future because it’s unclear what changes Vice President Harris might make if she wins in November, or what Trump might do if he returns to the White House. What.
As president, Trump blocked some deals on national security grounds based on recommendations from the Committee on Foreign Investment in the United States. Meanwhile, regulators under President Joe Biden have filed a record number of consolidated enforcement actions, Bloomberg the report said.
“We are at a crossroads and we don’t know which way policy is going to go,” Letellier said.
watch: How Big Tech Companies Quietly Acquire Artificial Intelligence Startups Without Actually Acquiring the Companies
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