Facebook, Apple, Microsoft, Google and Amazon (FAMGA) or the Big Tech have acquired more companies in 2020, when compared to 2019.
According to data from Tracxn, a firm that tracks investments and financials of private companies and start-ups, FAMGA have cumulatively acquired 35 firms in 2020 as against 31 firms in 2019.
Among the five, Apple tops the list with 11 acquisitions, followed by Facebook and Microsoft with nine each, Google at five and Amazon at one, thus far in 2020. Experts said the overall increase in numbers this year could be because of the increase in demand for digital services across the markets, the economic downturn making the deals more profitable, among other factors.
Effect of Covid-19
“FAMGA and tech stocks have outperformed this year, largely led by growth in Internet-driven consumption in both enterprise and consumer markets. The pandemic drove people online, helping accelerate habit formation. The Big Tech enterprises which already had large war chests continued to build on value,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India, adding that through the pandemic multiple opportunities emerged to acqui-hire, as valuations corrected in the first half of the year, and integrate new capabilities such as artificial intelligence, virtual reality, machine learning etc.
The amount spent on the acquisitions also has doubled in 2020 from 2019. Data showed that the total value of the disclosed deals of FAMGA’s acquisitions this year stood at $12.16 billion, a 101 per cent surge from last year’s $6.04 billion.
Anuj Golecha, Co-founder, Venture Catalysts, said due to Covid, valuations of several smaller innovative technology companies have eroded, thereby making deals lucrative and faster to close. He added that downturns also allow higher scope for negotiations to get good talent than when the economy is booming.
“Besides, businesses across the world are going digital and creating huge opportunities for bigger players to enter newer markets through acquisitions and establish dominance in those markets,” Golecha said, adding, “M&As are always great to enter a new market, segment or sector as it allows companies to start the game immediately instead of spending time building a product. We expect the M&A activities to further increase in the first half of next year.”