A Coming Wave of Social Media Acquisitions

19 10 2009

M&A Image

As we come out of the current world recession, larger technology companies will start to engage in more M&A activity.  Stock markets are still significantly off of their previous highs and business are just starting to rebound.  It’s a great time for larger companies with a social media agenda to pick up bargains.

On the social media front, Adobe entered into a definitive agreement to acquire Omniture for $1.8 billion on Sept 15th.  It seems highly likely that there will be more acquisitions to follow.

A recent article on CNN Money described the cash on hand at various technology companies and speculated on a coming wave of acquisitions.  Here are some leading technology companies and their positions in cash and marketable securities:

  • Cisco             $35 Billion
  • Microsoft    $30 Billion
  • Apple            $24 Billion
  • Oracle           $20 Billion
  • Google          $19 Billion
  • HP                   $13 Billion
  • IBM                $12 Billion
  • Dell                 $12 Billion

Read Full article

At the same time, the Nightly Business Report recently reported that the S&P companies were holding $800 Billion in cash and marketable securities.

Companies Who “Get” Social Media and Are Likely to Buy.

These companies are already have product lines in the enterprise social media space.  They will be looking to fill “gaps” in their product lines.

1.      Google gets social media and cloud computing services in general.  They are steadily executing on their strategy thought both build and buy options.

2.      IBM understands the value of social media well and is moving to integrate these technologies into the IBM Lotus product line.

3.      Microsoft also may be looking to add to Office Communicator /OCS product line.  Remember that Microsoft owns a piece of Facebook from an earlier investment.  Also, Microsoft’s highly publicized offer for Yahoo!failed.  They need to counter Google who is moving rapidly in this space.

4.      Cisco is moving into this market space.  They see it as an “adjacent” market opportunity.

Companies Who Have a Reputation for Doing Acquisition Integration Well.

(Historically, the majority of acquisitions fail to deliver the promised results, but these companies do particularly well.)

1.      Cisco.  Excellent history of successful acquisitions of all sizes over a ten plus year period.  Cisco has done a lot of work to move M&A closer to being a science than an art.

2.      IBM.  Very good at integrating acquisitions and building revenue.

3.      Oracle.  Not as long of a history as Cisco and IBM but they have been very active and effective recently, acquiring PeopleSoft, Siebel Systems, Hyperion Software, BEA Systems and Sun Microsystems.   It is not clear that Oracle has an interest in Social Media per se.  Also, they will be busy integrating the large Sun Microsystems acquisition in the coming quarters.

4.      Google.  They are far less visible in this space but have done dozens of acquisitions over the past few years.  The Postini and Pyra Labs (Blogger) acquisitions look to have been particularly successful.

A Deeper Look: Google

  • Google has the cash, smart people, and a strong vision of where social media is going.
  • Google wants to take a leadership role in Social Media.  They were rumored to have made an offer for Twitter and to have had talks with Facebook.  Google’s Orkut is a nice social media service, but is relatively unknown in North America.
  • The problem for Google is finding software that meets their internal requirements.

1.      Fills a strategic “gap” in the Google product line

2.      Can fit in with the Google data center, cloud computing software architecture

3.      Has the capacity to scale up to literally millions of simultaneously active users.

  • Unless a social media has been designed for the cloud and has had some success in scaling up their user base, it might be hard for them to fit into the Google architecture. However, if I were a VC, I would not fund a startup that did not have this in their plans.
  • The trend has been that Google tends to buy smaller, startup-type companies for their technology rather than large blockbuster deals.

See Google M&A Map

Summary

  • Social Media is red-hot.
  • Many large companies have the cash on hand to do acquisitions.
  • There are several companies out there who are looking to fill social media product line “gaps” and who have the money and know-how to do acquisitions.
  • It’s a great time to find relative “bargains.”
Advertisements

Actions

Information

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




%d bloggers like this: