Rethinking Big Tech M&A’s Bad Reputation

Google is in the hotseat again. But this time, it’s serious, and many are calling it the biggest tech antitrust government trial since Microsoft more than two decades ago. 

The Google trial is very narrow and focuses on whether the company broke any laws to gain monopolistic power in the search category. But the only reason Google’s Search business is even the size it is now is because of years of M&A to strengthen its position. 

There were some key acquisitions over the past decade or so that helped make Google’s business the behemoth it is today. A major one was the more than $3 billion acquisition of online advertising company DoubleClick in 2007. Acquiring DoubleClick mostly helped its ad business, but the data collected from it also helped its search business.

Following the DoubleClick acquisition, Google continued to buy other companies, such as ITA Software in 2010. ITA Software was the tool Google used to find flight deals through companies like Hotwire and Orbitz. Once Google bought ITA, it was able to launch its own travel product under its search business.

Since then, there have been countless acquisitions that have helped Google and its various businesses become the dominant force it is now. The Google antitrust trial and its outcome have broader implications for Big Tech and the future of tech M&A.  

U.S. lawmakers and regulators have been concerned about the massive size and dominance of Big Tech companies for years. But Big Tech companies didn’t get that big overnight — it was through decades of engaging in aggressive M&A while the economy was in a prolonged period of expansion.

Take Amazon, for instance. It started out as an online bookstore, but now its most profitable business is Amazon Web Services (AWS). And its latest acquisition of One Medical proves it’s making a nearly $4 billion bet on healthcare. Bezos even owns The Washington Post.

Then there’s Meta and its reputation for, “If you can’t beat them, buy them.” CEO Mark Zuckerberg’s insatiable appetite for buying rivals started just one year after the company was founded.  

The government failed in its job to properly vet major M&A deals, and now it’s trying to fix the mess it helped create. But because of this hyperfixation on Big Tech monopolies over the past decade or so, M&A in general has become vilified.

That vilification and regulatory scrutiny, coupled with a higher interest rate environment, has completely suppressed Big Tech M&A activity. In the second quarter, Big Tech M&A deal volume hit its lowest level in 18 quarters, with Apple being the only Big Tech giant to close a deal.

M&A’s bad reputation could have negative effects on the global economy, especially in the U.S. Europe has had more tech acquisitions than the U.S. for the sixth quarter in a row, according to CB Insights.  

M&A, in and of itself, is good for the overall economy because it improves both products and services for the billions of consumers around the world who use them. It also boosts efficiency and increases profitability. At least that’s the way it was viewed in the past.  

A lot of the narrative behind Big Tech M&A has been that these mega-cap tech giants have been forcefully buying out their competitors. However, the reality is that the majority of startup exits are acquisitions and not IPOs.

Not every tech founder wants to ring the opening bell at Nasdaq or NYSE. Some want a substantial payout instead. On top of that, when a bigger company with deeper pockets buys a smaller company, they can oftentimes enhance the product or service. 

As much as regulators want to paint Big Tech companies as villains, the fact of the matter is consumers still prefer the products and services from companies like Google, Amazon, Apple, Meta and Microsoft over the rest. For example, Amazon’s acquisition of Whole Foods created better pricing, and Google’s acquisition of YouTube increased global online video viewership.

That being said, Big Tech M&A regulation is still important. Not every deal is good for the market, and the government and regulators should be doing their due diligence in properly vetting deals to make sure growth in that specific industry is not completely suppressed. But M&A by Big Tech — or any other industry, for that matter — is often far more beneficial than harmful, especially from a consumer standpoint.