The vanishing internet acquirer 

Contact: Scott Denne

One of the most active acquirers of internet companies goes dark as Yahoo settles into its recess at AOL (now known as Oath). To be sure, the disappearance of Yahoo from the M&A scene happened well before the recent close of its sale to AOL. Yahoo hasn’t printed an acquisition in nearly two years, yet its official exit dampens an already stagnant environment for consumer internet deals.

Yahoo’s M&A machine shut down in 2015 – first through shareholder displeasure, then by its impending sale. In each of the two years before that, it printed an average of 24 transactions. Its more successful peers haven’t been much more aggressive lately. According to 451 Research’s M&A KnowledgeBase, last year saw 383 acquisitions of consumer internet businesses worth almost $60bn. Almost halfway through this year, we’ve tracked barely one-third as many deals and one-sixth of last year’s value.

Albeit for different reasons than Yahoo, the bigger and more successful internet giants have shied away from major purchases, despite seemingly ideal conditions. Amazon, Apple and Google have each inked five acquisitions this year. Facebook hasn’t done any. The stock prices of all four have run up this year – Google, the laggard of the bunch, sits 23% higher than where it was last year.

Yet not a single one of them has printed a $1bn deal since 2014. Back then they were chasing ancillary markets. Facebook shelled out $19bn for WhatsApp to push its social network into mobile messaging; Google, imagining synergies between mobile phones and smart homes, paid $3.2bn for Nest Labs; Apple wanted a new look for its accessories and headphones business so it bought Beats Electronics for $3bn; and Amazon stretched its (then) burgeoning presence in digital video into live videogames with the pickup of Twitch for $970m.

Today they’re still chasing ancillary markets, but the opportunities on their radar are too raw for them to make a large purchase. They’re pushing into self-driving cars, virtual reality and artificial intelligence assistants, markets that are too nascent to offer many big strategic targets.

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Posted in M&A