The five most valuable American technology companies have enough money to buy any startup at virtually any price. But although they have the means, Apple, Google, Microsoft, Amazon and Facebook have not been especially acquisitive this year.
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Among them, the companies have made just 12 disclosed purchases of private, venture-backed companies this year, according to an analysis of Crunchbase M&A data.* Of those deals, only two had reported purchase prices, adding up to just $515 million. Most of that came from a single transaction: Microsoft’s $500 million purchase of security provider RiskIQ.
So far, 2021 is on track to be an unusually inactive year for startup buying by the Big Five. For comparison, we tracked their deal count and disclosed spending on purchases of venture-backed startups for the past five years below:
The numbers for 2021 are much higher when we add in the tech giants’ purchases of public or nonventure-backed companies. Those totals are boosted mainly by two deals: Microsoft’s planned $19.7 billion purchase of Nuance Communications and Amazon’s $8.5 billion pending acquisition of MGM Studios (which is private but not venture-backed).
We look at Big Five M&A deals for the past five years involving all companies, both public and private, in the chart below:
Total deal count is somewhat higher than the disclosed M&A data indicates, as big tech companies are known to make stealth purchases as well. However, these deals tend to be on the smaller side.
They have the money, but not the motivation
In a year filled with relentlessly bullish news on the startup funding and exit front — with record venture investment, massive IPOs and strong M&A — this seems like a rare bearish indicator.
The Big Five, after all, could buy any unicorn they want. The five companies are collectively valued at around $9 trillion(!). Apple alone, the most valuable of the bunch, has a $2.4 trillion market cap. (The value of all the world’s unicorns, meanwhile, is estimated at around $3 trillion.)
Meanwhile, other companies are buying plenty of startups. Overall, acquisitions of venture-backed companies have been rapid-fire this year, with our prior analysis showing 2021 set to outpace the previous three years.
In the first five months of the year, there were 1,070 acquisitions of venture-backed companies with a reported total of $91.9 billion, according to Crunchbase data. The total includes big ticket deals such as Hitachi’s $9.6 billion acquisition of product engineering company GlobalLogic and Okta’s $6.5 billion acquisition of identity platform Auth0.
Antitrust concerns likely dampening dealmaking
So why are the Big Five largely sitting it out? The specter of heightened U.S. antitrust scrutiny would appear to be one factor.
During the Trump administration, the Department of Justice and the Federal Trade Commission, along with several states, filed lawsuits accusing Google and Facebook of anticompetitive practices. While Facebook won a dismissal of the suits filed against it this summer, lawmakers aren’t backing down on plans for tighter regulation.
Earlier this summer, House lawmakers introduced a raft of proposed antitrust bills that would create new hurdles for acquisitions of nascent rivals and make it easier to break up businesses. The House Judiciary Committee also grilled four Big Tech CEOs about the risks of monopoly power.
So, with lawmakers indicating they’ve had enough of Big Five’s ever-expanding market dominance, it seems reasonable for executives to pause on the kinds of giant startup acquisitions that invite regulatory scrutiny.
Everything is still up
It certainly doesn’t appear to be hurting them. Shares of all the Big Five have rocketed higher this year, along with their earnings.
When the companies revealed second-quarter financial results over the past three days, they tallied a collective grand total of $75.8 billion in profit and $331.6 billion in revenue. The results in many cases blew away expectations, which were already set pretty high.
Quarterly earnings indicate that the tech heavyweights don’t need to buy scrappy startups to keep up growth. They’re doing quite well with the massive resources and market clout they already have.
What does all this mean for startups?
So for now, odds seem lower that your startup will get snapped up by Google. Overall, the popular exit strategy of selling to Google (or Microsoft, Facebook, Amazon or Apple) looks like a much less likely option.
Luckily, there are still a zillion other avenues for exit — including IPO, SPAC, private equity or sale to a less-scrutinized acquirer — that remain wide open. And with hundreds of billions in cash among them, the Big Five have plenty of dry powder to return to the buying table whenever they so choose.
Crunchbase queries used in this article
Methodology
We track M&A deals when they are announced, not when they close. M&A deal count includes purchases by several subsidiaries of Big Five companies, including LinkedIn, Whole Foods, WhatsApp and Amazon Web Services.
Illustration: Dom Guzman
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