There are number of factors that motivate businesses to take over other businesses. These factors include innovation, integration, portfolio expansion, killing competition, talent or customer acquisition. The 5 most powerful tech companies (Microsoft, Google, Apple, Facebook and Amazon, hereinafter called the Big 5) have been at the forefront of making such acquisitions. They have strengthened their competitive position and have a combined market capitalisation of over $2.8 Tn. While comparison is odious, consider that the Indian GDP is around $2.3 Tn and one can imagine the value they have created. We have studied the acquisition strategies of the Big 5 to come up with some interesting observations and the implications that it has for innovation as well as for the general humanity at large.
The Big 5 Story
Google leads the way with volume of deals
The Big Five have made a total of 438 acquisitions in the last 10 years since 2007. 40% of all acquisitions made by the Big Five were made by Google, which acquired 172 companies since 2007. Google is by far the most active acquirer, averaging over 17 acquisitions per year i.e. at least one and half acquisition every month. Google M&A activity took a sharp dip in 2008, owing to the worldwide recession as their revenues dipped by 3% during the same year. Amazon has been the relatively most quiet of the five companies, acquiring an average of just over 5 companies per year.
Figure 1 : YOY number of acquisitions of Big 5 Tech Companies
2014 was the most prolific year
2014 was the hottest year in terms of acquisitions so far with 66 companies acquired by the tech giants. 2014 was also a year when Apple, Facebook, and Amazon made their biggest acquisitions with Beats, WhatsApp, and Twitch respectively. Meanwhile, in 2016 media has been the most popular industry for acquisitions, as Apple bought Carpool Karaoke and both Google and Microsoft acquired media platforms like Synergyse, Anvato. Groove, Beam etc.
Google tried to be social
Google bought 15 social networking companies since 2007 in an attempt to build out Google+ to capture social networking share of Facebook which is now deemed a failed attempt. Google’s acquisitions are more than any other tech giant including Facebook, who has acquired 11 other social networking companies.
Figure 2 : No. of acquisitions made by Big 5 Tech companies across verticals