Refinitiv, the global financial data firm, says that 2021 has been a record year for mergers and firm acquisitions (M&A) across the world. Refinitiv itself was acquired by the London Stock Exchange Group plc (LSEG) in January.
Refinitiv estimates that in the technology sector the number of deals to buy startups with a value less than a billion dollars, will number about 10,400 in 2021 — that's a rise of over 60% on the pre-pandemic year of 2019.
The level was 6,882 in the dot-com bubble year of 2000, and 2013 was at a decade low of 3,351.
The tech sector now constitutes 20% of the M&A market and with a value of US$888.2bn of announced deals to the end of September, the all-time high for the year will be above $1trn.
The pandemic has been good for Big Tech and just 3 tech giants control more than half the online global advertising market outside China according to estimates from media buyers GroupM.
Google’s parent company Alphabet, Facebook owner Meta and Amazon have doubled their share of ad revenues in the past 5 years. This year digital advertising will rise globally by 30% to $491bn.
Big Tech buys innovation through acquiring startups. They also use acquisitions to kill possible future threats. Non-compete clauses are common.
US companies buying startups with a value up to $92m need not disclose the deal to US regulatory authorities.
The Financial Times analysed Refinitiv data, and of the record 9,222 transactions to September 2021 to buy startups worth less than a billion dollars, 8,451 transactions or 91.6% had values at $92m or lower. Big firms spent $66bn on these startups in the first 3 quarters of 2021 and deals rose 35% in the time period.
A Federal Trade Commission (FTC) investigation report last September revealed that Apple, Facebook, Amazon, Google and Microsoft between January 2010 and December 2019 made 819 acquisitions that were not registered because of various loopholes.
Last month, Margrethe Vestager, the EU’s competition and digital policy commissioner, said “It’s important that everyone realises that it is best to get 80% now than 100% never. This is another way of saying that perfect should not be the enemy of very, very good.”
Vestager was pushing for the implementation of the Digital Markets Act (DMA) and the Digital Services Act (DSA). The focus of the DMA is to force so-called gatekeepers, such as Google, Facebook and Twitter, to ensure equal access on their online platforms, while the DSA aims to make services responsible for keeping illegal material off their platforms; "to create a safer digital space where the fundamental rights of users are protected and to establish a level playing field for businesses."
2021 venture capital funding
This week Atomico, the VC firm founded by Skype’s Niklas Zennström in 2006, published its annual State of European Tech report, with the news that an estimated $121bn was invested this year — almost three times the 2020 figure of $41bn and 10 times the level in 2015.
Global funding in 2021: "We are on track to hit a blockbuster funding year with $454bn invested through the first three quarters of 2021. This contrasts with $332bn invested globally in 2020 across all funding stages."
US startups raised roughly $240bn as of Sept 30, "dwarfing 2020’s full-year total of $166b, according to figures from Pitchbook, the venture-capital database."
Related
The Atlantic: Silicon Valley Abandons the Culture That Made It the Envy of the World: Once upon a time, in the notorious startup cradle, small was beautiful.
[Quantitative research suggests that big companies do different kinds of R&D than their more modest counterparts. Instead of coming up with new products, they come up with process improvements. “If the nature of innovation is distorted toward selling to an incumbent, you’re going to get more feature-driven innovation rather than systemic disruption,” Federal Trade Commissioner Rohit Chopra told me. As an example, O’Mara told me a story famous in Silicon Valley about how Xerox had a personal computer in its hands in the 1970s (thanks, Alan Kay!) but declined to commercialize it. “You get to a certain degree of bigness, and you’re making so much darn money on copy machines, why on Earth would you work on a PC and bring it to market?” O’Mara said. Apple, a startup at the time, would famously popularize PCs instead.]
