Darren Winters says to watch out for the last minute surge in tech acquisitions as the Fed and its western aligned central banks are now on a steady rate hike trajectory. Corporate mergers and acquisitions activity already hit an all time high during the first half of 2018, driven by mega deals in sectors like media.
M&A activity hit 1.03 trillion dollars in the US and 2.51 trillion dollars globally.
Tech acquisitions could be in the tailwind of this last-minute rush while credit remains relatively cheap
Tech acquisition activity could be about to go chili hot.
As Darren Winters explains, tech acquisitions are one way that a leader stays ahead of the game in terms of acquiring innovation and technology. Many of the large companies acquire the innovations of the smaller companies in the technology sector, bearing in mind that it is small nimble companies that are the most innovative in the tech sector.
So tech acquisitions is a way for large companies hedging their bet by gobbling up new startups which could provide them with a strategic edge sometime in the future.
It is true to say that large companies also invest in research and development but hierarchy management structure slows down decision making and to some extent stifles innovation. It is much easier for a few tech entrepreneurs to come up with disruptive technologies when they are not strapped into a corporate straight jacket.
All the stars are aligning for a boom in tech acquisitions
The innovative nature of the industry and still relatively cheap credit. Darren Winters takes a look at the big picture of tech acquisitions since 1991, which is when the internet became public. There is a number of players in the tech acquisitions space.
Top on the list is Google with already 214 acquisition since 1991, then Cisco with 193 tech acquisitions followed by Microsoft with 189 acquisition. Apple made 89 acquisitions. Amazon made 77 tech acquisitions and Facebook 65 tech acquisitions. Notice how the FANG companies made numerous tech acquisitions.
Interestingly, Google has had the most tech acquisitions, it only ranks in 6th out of this group in terms of dollars spent. Giants like Microsoft, Cisco, and IBM may make fewer tech acquisitions, but the companies they do buy have higher valuations. For example, Microsoft bought LinkedIn in 2016 for $26.2 billion which is more than Amazon has spent on all of its acquisitions (including Whole Foods) combined.
The tech acquisitions of the big four, Google, Facebook, Microsoft, and Amazon is continuing into the second half of 2018
Retail investors can profit from tech acquisitions by identifying who the big four predators are likely to gobble up (target) next. For example, LinkedIn shares were up some 47% in one day on news of a Microsoft takeover. So happy hunting for your tech acquisitions.