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Bitcoin Cryptocurrency Stock Market Large Tech Companies Prepare for Acquisition Spree – The Wall Street Journal


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Bitcoin Cryptocurrency Stock Market Large Tech Companies Prepare for Acquisition Spree – The Wall Street Journal

After pushing the pause button during the coronavirus pandemic, big enterprise-technology companies later this year are expected to go on a shopping spree for smaller tech firms, industry analysts say.The tighter market could leave fewer options for cash-strapped chief information officers, they say.“What this means for CIOs is likely higher prices and less choice,” said…

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After pushing the pause button during the coronavirus pandemic, big enterprise-technology companies later this year are expected to go on a shopping spree for smaller tech firms, industry analysts say.

The tighter market could leave fewer options for cash-strapped chief information officers, they say.

“What this means for CIOs is likely higher prices and less choice,” said Crawford Del Prete, president of technology research firm International Data Corp.

Mr. Del Prete said many large IT providers over the next few years will be looking to fill gaps or expand into new markets, in part by targeting embattled startups struggling to reignite sales and raise capital.

The gaps include areas such as cloud computing, collaboration, access management and other business continuity tools that saw a surge in demand during regional lockdowns.

Microsoft Corp.

said Tuesday that it was acquiring Softomotive, a robotic-process-automation maker that enables businesses to automate workplace tasks, a capability many businesses have turned to in order to keep daily operations running with a thinner workforce. Financial terms of the deal weren’t disclosed.

“For the largest players, we certainly see this immediate period as a potential opportunity to make plays to aggregate capabilities by acquiring smaller businesses that may need liquidity,” said J. Neely, managing director and global M&A lead at consulting firm

Accenture

PLC.

Large companies across the economy are seizing similar opportunities to grow, sparking worries about market consolidation in several industries.

Walmart Inc.

has leveraged its position to grab more of the retail market, reporting a 10% increase in U.S. sales for the quarter ended May 1, with gains in stores and online.

Uber Technologies Inc.

is in talks to buy

Grubhub Inc.,

The Wall Street Journal reported. The move would hand it a ready platform for delivery ordering, meaning Uber wouldn’t need to build out its own division, Uber Eats, and it would gain an edge over competitors like industry leader DoorDash Inc.

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Beyond a handful of deals, tech M&A activity has dropped off sharply as companies big and small deal with uncertain economic conditions, said Miro Parizek, a principal partner at Hampleton Partners, a market advisory firm.

Many deal makers are also unwilling to close multimillion-dollar transactions without physical meetings or the proverbial handshake, which are difficult to come by due to restrictions caused by the pandemic, Mr. Parizek said.

“What’s been dramatic has been that large deals have disappeared” in recent months, he said.

That is expected to change by the end of the year, he added, though megadeals will likely be supplanted by multiple acquisitions of smaller tech firms.

Gartner Inc.,

an enterprise technology research and consulting firm, estimates that transaction volume was down 65% in the first quarter from the year-earlier period.

Yet more than 130 technology vendors raised about $150 billion from investors between March and April, with just 13 companies accounting for 60% of the total, said a Gartner senior research director, Max Azaham.

“These large vendors have sufficient cash to weather the pandemic and have excess for acquisitions” in the year ahead, Mr. Azaham said.

Gartner in April put out a guide on how tech startups can best prepare for being acquired by a larger company. The guide shows similar declines in M&A activity during past recessions, although the pace accelerates quickly as downturns fade.

Beyond an upturn in deals, the guide said the recession sparked by the pandemic is likely to change the nature of M&A strategies among larger companies in the year ahead.

More large tech providers are expected to be in the market for startups and small firms developing virtual business tools, as many companies shift to a permanent remote-work model, Gartner said.

It said a similar pattern followed the 2001 recession, when companies began buying up e-commerce software makers, while the 2007-09 recession sparked demand for cloud and software-as-a-service companies.

Whatever the outcome, it will likely become trickier for CIOs in businesses across the economy to avoid vendor lock-in and the potential risks of having the bulk of a company’s enterprise systems in the hands of a single IT provider.

“For end users, there is a risk there will be fewer vendors to choose from,” Mr. Azaham said.

Write to Angus Loten at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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