Non-Tech Companies Get More Aggressive in Acquiring Start-Ups

New York Times writer Leslie Picker reported earlier this month that, “For years, mergers and acquisitions in technology were fairly straightforward: Every investment bank kept a list of a dozen or so companies like Google and IBM that had a track record of acquisitions and cash to deploy. When the time and price were right, bankers would seek to match the tech giants with a start-up, and a deal would be hatched.

Now the technology deal-making club has had its doors blown wide open.

“All kinds of companies, including century-old industrial stalwarts like General Motors and General Electric, are among the corporate giants acquiring tech start-ups of late.”

The article indicated that, “This trend, of course, reflects how new technology is radically changing many traditional businesses. Developments like connected homes and driverless cars are upending old models. Many companies have come to the realization that building technology in-house was a painstaking process that often meant getting leapfrogged by start-ups.

So companies not usually thought of as being in the tech sector have become more aggressive, making more than $125 billion worth of acquisitions in 2016, the most ever. Five years ago, that figure was $20 billion.”

Ms. Picker pointed out that, “Last year, the number of technology companies sold to non-tech companies surpassed those acquired by tech companies for the first time since the internet era began, according to data compiled by Bloomberg. Excluding private equity buyers, 682 tech companies were purchased by a company in an industry other than technology, while 655 were acquired by tech companies, Bloomberg’s data showed.”

The Times article added that, “Investment bankers expect this trend to continue this year as well. They have been fielding many calls from companies outside the tech sector wondering what shareholders might think about a potential tech acquisition.

Non-tech chief executives have been found mingling at technology conferences, trying to spot their next potential target. And the assortment of so-called unicorns, or private companies valued at $1 billion or more, may be more inclined to sell this year after very few went public or sold in 2016.”

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