Giant tech companies are seeking deals at their fastest pace in years, fueled by COVID-19 despite an increase in scrutiny by regulators.
The Financial Times reported Google, Amazon, Apple, Facebook and Microsoft have made 19 deals so far this year, according to Refinitiv, the London-based global provider of financial market data. This represents the fastest pace of acquisitions and strategic investments since 2015.
On Wednesday (May 27), PYMNTS reported Amazon is negotiating to purchase the California self-driving car company Zoox. Two years ago it was valued at $3.2 billion, FT reported.
Last month, Facebook closed a $5.7 billion deal for a minority stake in Indian telecom startup Reliance Jio, giving the social media giant a larger foothold in the region.
These coronavirus pandemic deals represent a different world compared to the 2001 recession and the financial crisis of 2008, when tech companies stayed on the sidelines as the stock market tumbled, the news service reported.
“One big difference between now and the last financial crisis is the cash balances of the tech majors are in the hundreds of billions, all effectively onshore, due to the Trump tax changes,” John Gnuse, a tech M&A adviser at Lazard Asset Management, a New York financial advisory firm that engages in investment banking, told FT.
These deals also solidify the tech giants’ deep pockets amid the COVID-19 crisis, as they seek to take advantage of their record valuations and become the dominant players in emerging sectors, FT reported.
The transactions come as some lawmakers have called for more scrutiny and a pause on mergers and acquisitions (M&As).
Late last month, Sen. Elizabeth Warren (D-Mass) and U.S. Rep. Alexandria Ocasio-Cortez (D-New York) proposed legislation to halt harmful mergers, that they say will protect Americans from further consolidation and concentration during the COVID-19 crisis.
The lawmakers introduced the Pandemic Anti-Monopoly Act. If approved, the measure would curb M&As during the pandemic by companies with more than $100 million in revenues.
“This crisis threatens to further entrench the power of Big Tech,” Sandeep Vaheesan, legal director at the Open Markets Institute, a Washington, D.C. think-tank, told the news service. “These companies are already extraordinarily powerful, but they’re well-positioned to emerge as the biggest winners of COVID-19 unless some legislative action is taken.”
While the Federal Trade Commission has begun a review of acquisitions made by the five tech giants dating back to 2010, antitrust advocates are skeptical that the Department of Justice or regulators can control spending by big tech companies.