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The world’s biggest tech companies have caught up with smaller competitors at an all-time high this year in a buying spree that comes as US politicians and regulators prepare to crack down on deals “under the radar.”
Refinitiv data analyzed by the Financial Times shows tech companies have spent at least $ 264 billion to buy potential competitors worth less than $ 1 billion since the start of 2021, double the previous record. in 2000 during the dotcom boom.
The glut of acquisitions comes amid much more rigorous scrutiny by the White House, regulators and members of Congress, who have accused big tech companies – especially Apple, Facebook, Google, Amazon and Microsoft – of stifle competition and harm consumers.
The Federal Trade Commission is investigating Facebook’s long-standing Instagram and WhatsApp acquisitions and has warned it could review other deals even after they’re executed. He has the power to break deals if he deems them illegal and block others in the future.
The commission last week released the results of a study of technology M&A activity from 2010 to 2019, highlighting a decade of frenzied activity in which companies quickly bought out smaller competitors.
Lina Khan, President of the FTC, said the study “underscores the need for us to take a close look at reporting requirements. . . and to identify areas where the FTC may have created loopholes that unjustifiably allow agreements to go unnoticed ”.
Transactions valued at less than $ 92 million do not need to be reported to US regulatory authorities.
Analysis of FT data shows that despite these warnings, trading has accelerated since the end of the reporting period. So far this year, tech companies have signed a record 9,222 deals to buy start-ups worth less than $ 1 billion, roughly 40% above 2000 levels.
Barry Lynn, director of the Washington-based Open Markets Institute, said: “It was quite predictable – in tough times, companies that are already well established are even more so.”
“This deal is bad because it makes these companies all the more powerful. It increases their power over the people who work for them, the capital markets and investors, and it blocks the kind of competition that can bring innovation.
Technology mergers and acquisitions of all sizes have reached new heights in 2021, in part because companies have boosted their digital capabilities as millions of people embraced the internet and e-commerce during the pandemic.
The FTC study found that Apple, Facebook, Amazon, Google and Microsoft between January 2010 and December 2019 made 819 acquisitions that went unrecorded because they did not meet reporting requirements. Besides the size of the transaction, other exemptions may include cross-border transactions in which the buyer does not acquire control.
Khan said the study showed how large tech companies routinely used start-up acquisitions to eliminate future competitors.
“[The study] shows how these companies have devoted enormous resources to acquiring start-ups, patent portfolios and entire teams of technologists – and how they have been able to do so largely outside our purview Khan said.
Transactions below the reporting threshold of $ 92 million also hit an all-time high this year, according to data from Refinitiv, with $ 66 billion spent on asset repossessions in this size class, at through 8,451 transactions, an increase of 35% compared to the previous year.
Microsoft, the cloud computing software group, was the largest acquirer of small assets among the five companies featured in the report with nine transactions below the FTC threshold. The company founded by Bill Gates also made bigger deals, including buying voice technology pioneer Nuance for $ 16 billion.
Amazon, the e-commerce giant, with eight transactions, is the second largest buyer in the small transactions category. Jeff Bezos’ company also struck a mega-deal by buying legendary MGM movie studio for $ 8.45 billion.
The FTC report comes amid a battle to transform American antitrust led by the Biden administration as well as the regulator, which has gained new firepower under Khan, now one of the most influential figures in the forefront of Washington’s fair competition movement.
The findings follow a sweeping order signed by Joe Biden in July to curb the grip of big business by eliminating anti-competitive practices. The order, which spanned industries ranging from technology and transportation to healthcare and banking, is part of the Biden administration’s broader strategy to tackle corporate concentrations of power across multiple sectors.
Apple, Facebook, Amazon, Google and Microsoft made 616 acquisitions valued at over $ 1 million, more than 75% of which included non-compete clauses for founders and key employees of target companies, according to the report. the FTC. At least 40 percent of transactions showing the age of assets involved companies less than five years old.
FTC Commissioner Rebecca Kelly Slaughter said: “I see serial acquisitions as a Pac-Man strategy: each individual merger, viewed independently, may not appear to have a significant impact, but the collective impact of hundreds of Smaller acquisitions can lead to a monopoly juggernaut.
Apple, Facebook, Amazon, Google and Microsoft declined to comment.
Additional reporting by Richard Waters, Dave Lee, Hannah Murphy, Patrick McGee
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