In our last technology acquisitions roundup, we examined some of the most significant examples of social media giants bolting-on businesses in pursuit of the lucrative “internet of things” market. In our latest roundup, we take a look at recent deals where large technology companies have acquired add-on businesses, particularly in the areas of social media, cloud, mobile commerce and security.
We set out below a selection of recent mergers and acquisitions which demonstrate this trend of adding-on business:
1. Yahoo acquired BrightRoll for $640 million
BrightRoll provides automated digital video advertising online for an impressive list of global brands with annual revenues now expected to top $100 million. The acquisition is expected to accelerate Yahoo’s strategy, which is focused on search, communications, and digital content through growth in mobile, social, native, and video advertising as acquiring BrightRoll will dramatically strengthen Yahoo’s video advertising platform, making it the largest in the US.
2. Alibaba acquired stake in Meizu for $590 million
Meizu is a Chinese smartphone maker with an estimated 2% of China’s smartphone market, far smaller than its domestic rivals Xiaomi, Huawei and Lenovo not to mention its international competitors Apple and Samsung. It is expected that Alibaba and Meizu will collaborate to integrate Meizu’s hardware and Alibaba’s mobile operating system and that Alibaba’s online shopping marketplaces will become distribution channels for Meizu’s phones and other devices.
This latest purchase has brought Alibaba’s investment in the mobile market (browser, search and apps) to more than $8 billion after earlier acquisitions such as AutoNavi (mobile mapping software) and UCWeb (mobile search engine). This is an interesting move from Alibaba and an important step in its overall mobile strategy.
3. Facebook acquired WhatsApp for an estimated $22 billion
WhatsApp is a subscription based instant messaging service which allows more than 600 million users to exchange messages, photos and videos each month. Adding these 600 million monthly users to Facebook’s existing 1.35 billion monthly active users gives Facebook a staggering global reach. This acquisition wins Facebook a share of the hotly contested mobile messaging market and could help to deliver big growth for Facebook in emerging markets where WhatsApp is extremely popular.
4. Microsoft acquired Mojang for $2.5 billion
Mojang is the Swedish creator of Minecraft, a popular video game which has sold over 54 million copies and is one of the top-selling apps. With Minecraft, Microsoft has acquired a game with proven profitability and avoided an expensive and risky development process. Microsoft believes it will break-even on the acquisition by the end of 2015. This is a logical move for Microsoft as popular content should help to expand the sales of its gaming platforms and increase its presence on rival mobile operating systems.
5. SAP acquired Concur for approximately $8.3 billion
Concur provides an integrated cloud-based travel and expenses management platform for businesses such as travel companies, credit card companies and technology providers. This acquisition is expected to strengthen Europe’s biggest software group’s position in providing B2B cloud-based services. SAP says it is now the second largest cloud company by revenue and will have over 50 million users in the cloud, more than any other enterprise cloud company. This is one of the most significant deals in cloud and emphasises the change in the B2B software market.
6. BAE Systems acquired SilverSky for $232.5 million
SilverSky is US-based cyber security company operating in sectors such as finance, energy and critical infrastructure and manufacturing. It provides cloud-based email and network security services. BAE will boost its cyber and intelligence division and flags protecting business’ critical information and networks from cyber-attacks as a key growth market for the company. Silversky has a strong presence in the US market with a growing business in Asia and Europe.
Ian King, Chief Executive, BAE Systems said: “SilverSky’s cloud-based email and network security solutions complement our existing portfolio and increase our presence in the United States, a very significant market for IT security. The enlarged business will offer customers an attractive suite of products and services to protect critical information and networks from the rapidly growing threat of digital crime.”
Smaller, innovative and fast-growing companies will continue to be key targets for the technology giants. Not only to provide useful add-ons which complement the business and increase profits, but also to diversify into significant growth areas that could be the future of the global technology market. Acquiring a small company with a proven product can reduce the risk of development and earn an instant market share - even if the deal comes with a hefty price tag.
We can expect to see more acquisitions in 2015 where the TMT sector is again predicted to outstrip the already positive outlook for mergers and acquisitions generally.
Our sector leader, Charlotte Walker-Osborn, commented in a report published by Ranconteur on 8th February 2015 (“Bright future for UK FinTech” ) which was also published on the Sunday Times on the same day:
“Charlotte Walker-Osborn, partner and head of telecommunications, media and technology (TMT) at law firm Eversheds says London can expect to see even more mergers and acquisitions in 2015 from TMT companies that have amassed large cash balances in recent years.
‘Add-on companies, which complement their businesses and take them to the next level, will continue [to acquire] with speed, particularly in the areas of social media, cloud, mobile commerce and payment, as well as security,” she says. “Traditional telecoms, media and tech companies will continue to become companies which offer all three areas, as true convergence becomes fully realised.