Dealmakers at the largest technology and life science firms in Silicon Valley finished the first half of 2023 on a disappointing streak, with M&A and investment activity remaining far below where it was at the start of 2022.
The dreadful fall in M&A activity nationwide since the beginning of last year has been the talk of dealmaking circles. So it comes as no surprise to see a corresponding plunge in the number and value of M&A and investment deals involving the members of the newly released 2023 Fenwick-Bloomberg Law SV 150 List, which ranks the 150 largest publicly traded tech and life science firms in Silicon Valley, based on 2022 revenue.
Only 91 pending and completed deals involving companies on this year’s SV 150 list were announced in the first half of 2023, down 45% from H1 2022 (166 deals). That total is the same as the previous quarter. Even so, if the current pace keeps up for the remainder of the year, 2023’s total deal count could be one of the lowest for Silicon Valley in decades.
Meanwhile, the dollar value of deals involving the biggest Silicon Valley firms has been on an even steeper decline. The total volume of the 91 deals announced in H1 2023 was approximately $14 billion, down more than 85% from H1 2022’s $97 billion total.
Top Earners Not Necessarily Top Dealmakers
M&A activity among the SV 150 may be down, but a look at the list’s five largest companies shows that acquisition is not the only way to become a top revenue firm in Silicon Valley.
The top four firms on this year’s SV 150 list remained the same as the previous year’s, while TD Synnex Corp. climbed up to the fifth position this year. Unlike its counterparts, TD Synnex was the only top five firm by revenue to record zero deals—as either an acquirer or a seller—since the beginning of 2022.
Not much busier in terms of deal activity was Apple Inc., the top-ranked firm by revenue, which was involved in only five deals since the beginning of last year. Although Apple has maintained the No. 1 spot on SV 150 lists each year since 2019, it has also earned its reputation of eschewing acquisitions, unlike its tech giant counterparts.
On the other hand, Google’s parent Alphabet Inc. was involved in 50 M&A and investment deals in 2022 and first-half 2023, while Meta Platforms Inc. has been party to 16 transactions, about a third as many as Alphabet, and Intel Corp. rounded out the top five with a mere seven deals.
Alphabet’s activity is not new: 2022 marked the fifth consecutive year that Alphabet has been by far the most active acquirer and investor among all the firms on the list. Looking just at acquisitions and investments—not sales—since the start of 2022, Alphabet was the buyer in 13 M&A deals and 33 investment deals, most of which were venture capital fundings. The next top buyer was NVIDIA Corp. Although it ranked number 14 on the list, NVIDIA was the second most acquisitive company and was the acquirer or investor in 18 deals (three M&A and 15 investment deals).
What Are the Top Buyers Buying?
Software remains the prime target industry for top Silicon Valley firms, lining up with previous years’ results. Of all 303 deals in 2022 and first-half 2023 in which the top Silicon Valley firms were an acquirer or investor, about 46% involved a target in the software industry.
The types of businesses targeted are spread across computer graphics, software tools, applications, and computer software. Other target industries identified were internet, telecommunications, and consumer non-cyclical industries.
Notably, among the software targets, top buyers are showing interest in artificial intelligence start-ups lately. For instance, three of the top buyers on the SV 150 list (Alphabet, NVIDIA, and Salesforce) recently came together to invest in Runway AI Inc. Also, NVIDIA took part in one of the largest funding rounds in artificial intelligence fundraising at $1.3 billion for Inflection AI.
Antitrust Concerns, Regulatory Caution Ahead
Since the start of this year, trouble from regulators has been a concern among potential dealmakers considering entering into transactions. Several deals are facing regulatory scrutiny.
For example, one of the top 10 firms by revenue on this year’s list, Broadcom Inc., received a statement of objections from the European Commission in response to the announcement of its $61 billion takeover of VMWare Inc.
As if the current regulatory probe was not enough, US antitrust agencies announced this week an overhaul to their merger screening process, which could delay some M&A deals by months. If potential buyers’ frustration with the regulatory atmosphere continues, it is unlikely that M&A deals will pick up in the second half of the year. Moreover, the Silicon Valley firms with enough cash on their balance sheets to afford mega deals would be the ones most vulnerable to heightened regulatory scrutiny, making an already unappealing deal environment even worse.
In other analysis articles covering the Fenwick–Bloomberg Law SV 150 List: Preston Brewer’s July 12 analysis looks at the artificial intelligence risks that companies are disclosing in their SEC filings; and Andrew Miller’s July 17 analysis focuses on venture capital and other private equity deals.
Bloomberg Law subscribers can find related content on our M&A Deal Analytics resource.
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