by Brenon Daly
Like a lot of us, Google has gotten more conservative as it has grown older. The search giant, which was born on this day 20 years ago, has dramatically slowed its once-frenetic M&A program, cutting the number of deals it announces each year to the lowest level since the recent recession. It’s almost as if Google has turned into a bit of a homebody as it hits the corporate equivalent of middle age.
So far in 2018, Google has announced just seven deals, according to 451 Research’s M&A KnowledgeBase. While Google’s pace of almost one acquisition per month leaves most other corporate acquirers in the dust, it is a dramatic slowdown from the recent rate at the company. (We would note that even as Google invests less in its inorganic growth initiatives, it continues to amply fund its organic growth initiatives. The company is currently spending $5bn per quarter on research and development.)
In terms of M&A, from 2010-2014 – when Google was, effectively, an adventurous teenager – the company averaged more than two deals each month. Our M&A KnowledgeBase shows that Google’s pace peaked in 2014 at 36 acquisitions, a head-spinning rate of three deals every month. For comparison, there are highly valued, large-cap tech companies with oodles of cash, like Google, that don’t even average three deals every year.
Of course, the recent decline in deals has more to do with strategy than chronology. In early 2015, Google appointed a former investment banker with a reputation for fiscal discipline as its CFO. It followed that up a few months later by overhauling its business and even adopting a new name, Alphabet. The impact was immediate.
As we noted about a half-year into the new era, the newly renamed Alphabet is focusing much more on ‘alpha,’ in the sense of being the top dog of internet advertising, as well as delivering ‘alpha’ to shareholders (Google stock has more than doubled since it made the changes). However, that has come at the cost of the second part of its name – the company is making far fewer M&A bets. That’s even more the case today, as Google rolls into its third decade of business.
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