As US regulators and politicians prepare to crackdown on deals that go under the radar, some of the world's biggest technology companies have been able to snap up smaller competitors at an unprecedented rate this year.
Refinitiv data, which was analysed by the Financial Times, shows that tech companies have spent at most $264 billion on potential rivals since 2021. This is double the amount of the record set in 2000 during dotcom boom.
The glut of acquisitions comes amid much tougher scrutiny from the White House, regulators and members of Congress, who have accused large technology companiesparticularly Apple, Facebook, Google, Amazon, and Microsoftof stifling competition and harming consumers.
The Federal Trade Commission is currently investigating Facebook's acquisitions of Instagram, WhatsApp, and other services. It has also warned that it may examine transactions that have already been completed. It can cancel deals or block them from the future.
Last week, the commission released the findings of a study about tech M&A activity between 2010 and 2019. It highlighted a decade of frenetic activity that saw smaller competitors being bought up at an accelerated pace.
Lina Khan, FTC chair, stated that the study highlights the need to examine reporting requirements...and to identify areas where FTC loopholes may have been unjustifiably enabling deals fly under the radar.
Transactions less than $92million do not have to be reported to the US regulatory authorities.
The FTs data analysis shows, despite these warnings that dealmaking has increased in pace since the report's timeframe. Tech companies have signed a record 9,222 transactions since the beginning of the year to purchase start-ups valued less than a million dollars. This is almost 40 percent more than the 2000 level.
Barry Lynn, director at the Washington-based Open Markets Institute said that this was completely predictable. In difficult times, companies already established get more entrenched.
Dealmaking is bad as it increases the power of these corporations. This increases their power over people, capital markets, investors and employees, and it prevents them from bringing about innovation.
Advertisement
In 2021, tech mergers and acquisitions of any size have reached new heights partly because companies increased their digital capabilities during the pandemic.
Serial acquisitions are a Pac-Man strategy. The collective effect of hundreds of smaller acquisitions can create a monopolistic giant.
According to the FTC, 819 acquisitions were made by Apple, Facebook, Amazon and Google between January 2010 and December 2019. These transactions were not recorded as they did not meet reporting requirements. Other exemptions could include cross-border transactions in which the buyer does not acquire control.
Khan stated that the study showed how Big Tech companies used acquisitions of start ups to eliminate their competitors.
Khan said that the study shows how these companies have been able to acquire start-ups and patent portfolios as well as entire teams of technologists.
According to Refinitiv data, deals worth less than $92 million reached an all-time high. $66 billion was spent on assets of this size through 8,451 transactions, up 35 percent over a year ago.
Microsoft, the software to-cloud computing company, was the largest acquirer of small assets, with nine transactions below FTC threshold. Bill Gates' company also made larger deals such as buying Nuance, the voice tech pioneer, for $16 billion.
Amazon, an e-commerce giant and second most acquisitive company in small deals, was the second with eight transactions. One megadeal was also done by Jeff Bezos' company, when it purchased MGM Studios, a legendary film studio, for $8.45 Billion.
The FTC report is coming amid a fight to transform US antitrust under the leadership of the Biden administration and the regulator. Khan has been reenergized as one of Washington's most influential figures in the fair competition movement.
These findings are in response to a broad order that Joe Biden signed in July. It was designed to curb the influence of big business and eliminate anti-competitive practices. This order covered a range of sectors, including technology, transportation, healthcare, and banking. It is part of broader strategy by the Biden administration to combat concentrations of corporate power across multiple industries.
According to the FTC report, Apple, Facebook and Google made 616 acquisitions worth more than $1million. More than 75% of these deals included noncompete clauses that protected the founders of the target companies. Companies less than five years of age were involved in at least 40% of the assets-age deals.
FTC Commissioner Rebecca Kelly Slaughter said that serial acquisitions are a Pac-Man strategy. Each merger may not seem to have significant impact on its own, but the combined impact of hundreds can create a monopolistic giant.
Apple, Facebook and Microsoft declined comment.
Additional reporting by Richard Waters and Dave Lee, Hannah Murphy, Patrick McGee
2021 The Financial Times Ltd. All Rights Reserved.
