With tech giants including Microsoft, Apple and Google spending $128.5 billion on acquisitions, is the battle for tech dominance being fuelled by acquisition or innovation?
The tech industry continues to be one of the fastest changing sectors on the global stage. Analysing the acquisitions that have taken place across the tech space reveals that the tech giants are competing in a head-to-head race to gain a head start on the future.
Says Jeff Liu, EY Global Technology Industry Leader, Transaction Advisory Services: “Technology deal making is setting records because all buyers are motivated in the current environment. Incumbent tech companies seek deals to accelerate mobile and cloud-driven transformations; non-tech companies seek strategic technologies; and private equity firms seek opportunity in hidden gems overlooked by many investors.”
Growth and customer acquisition are always the focus of leading tech companies. However, with a market sector that is changing faster and faster all the time, and consumers that demand constant innovation, making strategic acquisitions is one of the most effective ways for tech companies to remain dominant in their sectors.
The amounts of money being spent by the big tech firms on takeovers is nauseating, yet reveals a desire to innovate quickly with acquisitions a way to instantly gain technology and expertise.
With a mass of takeovers across the tech sector, gaining meaningful insight and drawing conclusions can be difficult for industry experts and casual observers alike.
To bring clarity and the ability to analyse the takeovers that have taken place, we have mapped the acquisitions of the big five tech companies (Amazon, Apple, Facebook, Google and Microsoft), over the last 30 years.
Mapping the data means you can filter the acquisitions by acquirer, cost, year, CEO or industry to find out which of these billion dollar companies spend, what emerging trends they are investing in and which CEO’s have been key in determining their success.
What the visualisation of the acquisition landscape offers is an insight into the potential directions for the world’s most advanced tech companies, and where they see the future. For instance, our analysis reveals clear trends within a number of sectors.
AI is a major focus for acquisitions, as the intelligent home comes closer to reality. And the fact VR and AR is being developed by more than a dozen acquired companies gives a clear hint at a virtual environment that could become as common as smartphones are today.
What is also clear is that the approach of the different CEOs is is reflected by their acquisition volumes. Most aggressive of the tech tycoons is Larry Page, averaging a whopping 21 acquisitions a year in his 2nd term as Google’s CEO between 2011 and 2015. Larry page acquired 35 companies in 2014 – that’s nearly 3 acquisitions a month!
Filtering the Geckboard data by CEO reveals which CEOs have been on a spending spree.
The race to dominate the tech space has never been more prevalent than over the last year. 2016 was dominated by Microsoft’s acquisition of LinkedIn but media has been the most popular industry for acquisitions, as Apple bought Carpool Karaoke and both Google and Microsoft acquired media streaming platforms. Google’s newly appointed CEO Sundar Pichai snapped up 13 companies last year, while Microsoft’s Satya Nadella bought 8.
Satya Nadella is the 2nd most active CEO, averaging 12 acquisitions per year since he has been put in charge of Microsoft. Steve Jobs, known for his view of acquisitions as failures to innovate, acquired companies reluctantly at a rate of 3 a year.
Microsoft’s Xbox means they’ve been most active in gaming with 13 acquisitions, Amazon’s activity with 4 acquisitions (3 since 2014) including their biggest ever acquisition of Twitch for $970 million suggests they see a future in this field.
In their review of US technology deals, PwC concluded: “Domestic and global political and economic uncertainties weren’t enough to side-line technology buyers’ intent on securing their position in a dramatically shifting landscape. Deal volume declines throughout the year-to-date period have been offset by a large concentration of multi-billion dollar transactions, with deals greater than $1 billion in value contributing $84.2B to Q3 2016. While Semiconductor and IT Services stole the headlines in the first two quarters, Software firmly reclaimed its place as the leader in technology deals during Q3.”
With the trend for more takeovers across the tech sector set to continue, being able to understand the motivations of the leading players offers previously unavailable insights.
The Big Five have made a total of 617 acquisitions to date, one-third of those acquisitions were made by Google who are by far the most active acquirer, averaging 12 acquisitions per year- that’s at least one every month. Apple has been the quietest, acquiring an average of 2 companies a year.
- $128.5 billion in total was spent on acquisitions by tech giants, half of which in the last three years.
- $26B was spent by Microsoft acquiring LinkedIn making this acquisition the most expensive in history.
- 4 out of the 10 acquisitions made by Apple have been in the AI sector fuelling rumours that the company is about to step into the AI in the home space.
- 22 acquisitions were made by Amazon since 2011 making it the most aggressive user of acquisition.
- 18 social media networks were bought by Google in a bid to remain relevant in the social media space.
- 30 acquisitions were made in the mobile space by Google, to reflect the growing popularity of its Android operating system.
The focus on a narrow range of industries across tech takeovers clearly reveals which tech sectors are receiving the most attention for R&D.
Geckoboard collected the data using a multitude of sources, which include publications such as TechCrunch, VentureBeat, Fortune, Forbes, and Business Insider; databases such as Crunchbase and AngelList; and SEC filings of the big five tech companies.
Simon Whittick, VP Marketing at Geckoboard.
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