M&A makes a comeback

This week, we witnessed a surge in M&A activity, the likes of which we haven’t seen for some time. The $32 billion Google-Wiz deal stood out by its sheer size, but it was far from the only one. We also saw Softbank scoop up chip maker Ampere for $6.5 billion, and Nvidia grab synthetic data startup Gretel in a transaction believed to be worth at least several hundred million dollars.

When you add ServiceNow buying Moveworks for nearly $3 billion last week, we have ourselves a clear trend. As Jamin Ball noted on LinkedIn: M&A is back!

It’s fair to say that big tech buying has slowed some in recent years. In spite of some notable exceptions like Broadcom buying VMware for $69 billion and Cisco acquiring Splunk for $28 billion, there is a general perception that M&A activity had quieted, rightly or not.

So what’s leading to this current wave? It starts with AI of course. Companies are in desperate need of AI technology and more importantly AI talent, and the easiest way to get it is via acquisition. Aura, a workforce intelligence platform, wrote in a company blog post last year: “Pursuing AI talent is no longer just a hiring strategy—it’s a core component of long-term business survival in the age of artificial intelligence. The number of AI professionals with expertise in machine learning, AI-powered platforms, and real-time data processing is finite. Big Tech is determined to grab as much of this expertise as possible,” the company wrote.

As though to prove that point, in a recent interview on Fortt Knox to discuss the Moveworks acquisition, ServiceNow CEO Bill McDermott said adding 500 new employees, many with AI chops, was helping to supplement his company’s organic agentic AI push.

Another common narrative regarding the recent buying surge is that the new administration is going to be friendlier to M&A than the prior one, opening the door to the kinds of action we saw this week. Yet recent moves contradict this idea. Consider that we have seen the DOJ sue to stop the $14 billion HPE-Juniper Networks deal, one of last year’s bigger tech transactions. What’s more, the FTC and DOJ have put Meta, Alphabet and Microsoft all on notice with big antitrust-related actions that have not slowed down since Inauguration Day.

"Pursuing AI talent is no longer just a hiring strategy—it’s a core component of long-term business survival in the age of artificial intelligence."

None of that sounds particularly friendly to large companies or big M&A. There’s also the matter that the U.S. isn’t the only country that has to approve these transactions. The companies will still have to convince U.K. and the EU regulators, both of which have been fairly strict when it comes to large pacts like Google-Wiz. Remember, it was regulatory pushback in the EU and UK that convinced Adobe to end its pursuit of Figma, a deal that would have been worth $20 billion.

This spate of activity certainly feels different, and appears to bode well for companies looking to exit via acquisition. Still, each of these deals has to clear a gauntlet of regulatory hurdles before they close, and evidence suggests that it’s not going to be any easier than in the past. Regardless, companies looking to bolster their AI capabilities and talent seem to be willing to take that chance.

-Ron

Photo by Eric Prouzet on Unsplash