Why Build When You Can Buy? Current Trends In Big Tech Acquisitions
2021 saw a decade-high number of deals for some of the world’s leading big tech companies. Purchase-power has been in full force as major players seize on opportunities to buy rather than build.
And for startups and small and medium enterprises (SMEs) in the UAE and the wider MENA region, this presents an encouraging opportunity to prime their product or service with the hopes of getting the attention of a big tech buy-up.
The question is: What exactly have the big techs been buying up, and how do you get your business off the shelf and into their shopping cart?
Let’s take a closer look at the spending habits of four tech giants.
In 2021, Microsoft made 56 publicly disclosed deals, and it has a track record of buying up cybersecurity startups, as exemplified by its acquisition of CloudKnox. Not just a response to the proliferation of cyberattacks due to the increased risk posed by remote working, enhanced security is also a profitable revenue stream.
For that reason, tech startups with a solution for specific cybersecurity problems are an attractive proposition – especially if they help to close the gaps on cloud-based security issues. Ranked fifth in the world on the Global Cybersecurity Index, the UAE is a world leader in the protection of citizens and residents, making it the ideal location for the development of marketable data security and privacy solutions.
Early in 2022, Microsoft grabbed the headlines with the high-profile acquisition of software giant Activision Blizzard for USD 69 billion. While this has all the signs of a big tech company looking to dominate the video game market, it also suggests a bid to capitalise on the rise in popularity of mobile gaming.
In the UAE, this segment is forecast to reach USD 164 million in 2022. With gaming on course to become the dominant form of entertainment this century, it seems an obvious, if highly competitive, market to get into if you’re a tech-savvy entrepreneur.
Global online retail behemoth Amazon got a lot of deals done in 2021 – 29 publicly disclosed acquisitions. With a net income of USD 33.36 billion in 2021, the e-commerce giant certainly has money to burn on the items in its diverse acquisition wish-list. But what kind of products and services have been finding their way into the Amazon basket over the last decade?
Back in 2017, Amazon made headlines with the purchase of Dubai-based online retail giant Souq.com for $580 million USD – which at the time was thought to be the biggest ever technology merger and acquisition (M&A) in the Arab world.
With Souq.com delivering to six Gulf states and Egypt, the acquisition helped Amazon gain faster inroads into those markets. At the same time, Amazon’s cutting-edge logistics and technical expertise were an ideal fit for a business targeting a young, tech-savvy generation – who at that point in time still preferred the shopping mall to online retail.
Amazon’s purchase history has also seen it take a slice of new markets, most notably with its acquisition of Whole Foods Market to expand online grocery services aimed at young, high-end shoppers. And in 2020, Amazon took the wheel of Zoox Inc – the self-driving car startup from California – hinting at a future of self-driving deliveries or a ride-hailing service.
It’s also been stocking up on entertainment products and services. You may recall its cash purchase of game-streaming platform Twitch in 2012, and more recently MGM – the historic US film studio.
For Dubai-based startups, Amazon’s strategic move into the region signals an opportunity to provide products and services that reflect and offer ways into the local market, and also space for innovative tech that fits with broader aims of e-commerce.
For a number of years now, Alphabet – the parent company of search giant Google – has been acquiring other people’s ideas and products, casting its net far and wide to haul in the best of emerging tech. Sometimes these deals appear to be off-the-wall.
Take the high-profile acquisition and resale of Motorola Mobility, for example. In reality, it was buying mobile technology patents to compete with Samsung in a bid to convince it to tone down its customizations of the Google-owned Android operating system.
Alphabet has a track record of buying up tech startups and SMEs, not necessarily because of their products, but for the brains behind these businesses. This enables the company to bring in the latest, freshest talent to work on its own products.
And like Microsoft, its recent buyouts seem to be cloud and security focused, most recently with the acquisition of Mandiant – a cloud cybersecurity specialist. This move signals increased competition with other cloud service providers, like Microsoft and Amazon, for the M&A of these types of cloud-focused technology companies.
Unsurprisingly, for the dominant force behind search, Alphabet M&A has also focused around big data, the most high profile example being its acquisition of business intelligence software Looker in 2019 to broaden its Google Cloud data analytics offering. But cast an eye over a list of its most recent publicly disclosed acquisitions, and you’ll see an A to Z of everything from tech wearables (such as FitBit and North) to learning apps (Socratic).
Meta – the parent company of the Facebook platform – has been making the headlines for a number of reasons over the past few years. Its high-profile acquisitions of Instagram and Whatsapp have led to an antitrust lawsuit, but it’s the company’s venture into the as-yet non-existent ‘metaverse’ which has sparked a frenzy of M&A activity, mostly around gaming and virtual reality. In fact, peruse its list of most recent acquisitions, and it’s dominated by startups and SMEs developing virtual reality games for use with its proprietary Oculus headset.
If you’re not in either of those niches, then fear not. The proposed ‘metaverse’ is a work in progress, which means there’s clear scope for innovative tech to take a lead in what is still an unknown virtual universe and untapped global market. Plus, back in the real world, there are developing use cases for VR to help solve some of the world’s problems. For example, the UAE is already deploying VR technology in a diverse range of contexts, from assisting with stroke rehabilitation to training urban planners.
Final Thoughts On Big Tech Acquisitions
Being bought by a big tech firm is an aspiration held by many startups and SMEs. But any business owner would be wise to focus on delivering their company’s core offering, rather than overly focusing on attracting the attention of the big techs to the detriment of their own product or service.
That’s not to say it might never happen – it could happen – especially if you’re developing cutting-edge tech that can easily solve a problem for a big tech company. A great example of this is Alphabet’s recent acquisition of Kustomer – a customer service startup – which will enable Facebook to offer extended services to business customers through omnichannel communications.
The bottom line is that whatever business you’re in, if you do it well, and you’re strategically based in a business-friendly environment, you’re going to get noticed one way or another – whether that’s by a big tech, or an ever-growing customer base.