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Marker

No Mercy No Malice

Understanding the Corporate Feeding Frenzy

Most high profile acquisitions don’t pay off. But the ones that do, pay off bigly

Eyeball Acquisition

Firms in every sector are realizing that the best way to reduce their CAC (customer acquisition cost) is to produce proprietary content that keeps customers engaged and increases word of mouth. Media companies cultivate engaged communities that take years, if not decades, to build. While a Gulfstream 500, at $45 million, seems impossible to rationalize economically, it can be justified if you have more money than time (i.e., if you’re an old rich person). Fintech firms are about to embark on the mother of all midlife crises and pay huge sums for private jets posing as media firms.

  • Affluence
  • Engagement
  • Loyalty

Match Game

If you’re not buying eyeballs/audiences, you’re buying features/products. Big Tech has been bolting on capabilities this way for decades. The iPhone is a Frankenstein of acquired tech, from the touchscreen (FingerWorks, 2005), to the SoC (P.A. Semi, 2008), to Siri (Siri, 2010). Amazon bought robotics (Kiva, 2012), grocery stores (Whole Foods, 2017), and smart doorbells (Ring, 2018). Microsoft launched its empire on a product acquisition (DOS, which it bought way back in 1981).

Let’s Go Crazy

Tesla could buy truck stop company Pilot Flying J. Tesla’s been building superchargers at the company’s locations for several years, but bringing the entire operation in house would let it upgrade the user experience and extend Tesla’s brand and value proposition — think Apple Store. Vertical integration is in Tesla’s DNA — it makes more of its own components than traditional auto manufacturers do, and Elon has said that “building the machine that makes the machine” is a critical success factor. The company owns its own sales and service network already. An integrated Tesla experience at the charging station would make its passenger cars more valuable today and a true long-haul variant of the Tesla Semi more viable tomorrow. It might look like a step backward for the EV king to start selling gasoline, but what better way to put itself in front of potential electric vehicle customers? Many long haul truckers own their own rigs. Elon will have to pry Pilot Flying J away from Warren Buffett, but a few billion in Tesla stock should break it loose. Maybe a Twitter poll?

2022

My annual Predictions are coming up in a few weeks. Some likely M&A-related predictions for 2022:

  • The regulatory big chill around big tech and acquisitions thaws: either the DOJ proves flaccid, or it breaks up companies and oxygenates the marketplace. Both outcomes give clarity, and these companies will begin acquiring again.
  • 2022 is the biggest year in M&A in recent history, as the “Race to the SuperApp” inspires leviathans to couple with other leviathans.
  • Fintech and legacy banks go shopping for media and content.
  • Twitter cleans up the fake accounts suppressing its revenue, the stock drops below $40, and Jack unites his sisterwives (Square acquires Twitter).
  • Peloton gets bought. Its likely acquirers? Nike or Apple.
  • An NYU professor acquires the Rangers International Football Club, PLC.