Working Paper: NBER ID: w29642
Authors: Ginger Zhe Jin; Mario Leccese; Liad Wagman
Abstract: Some argue that large platforms, such as Alphabet/Google, Amazon, Apple, Facebook and Microsoft (or GAFAM), are unusual in their number, pace and concentration of technology mergers, with the potential to harm market competition. Using a unique taxonomy developed by S&P Global Market Intelligence, we compare the M&A activities of GAFAM to other top acquirers from 2010 to 2020. We find: (i) GAFAM completed more tech acquisitions per firm than other groups of top acquirers, and acquired younger and more consumer-facing firms on average. (ii) The top 25 private equity firms outpaced GAFAM in tech acquisitions per firm since 2018. (iii) GAFAM acquisitions are less concentrated across tech categories than other top acquirer groups, due, in part, to an “acquire-adjacent-and-then-expand” strategy. (iv) Over time, more and more GAFAM and other top acquirers acquire in the same categories. (v) No evidence suggesting that a GAFAM acquisition in a category, compared to similar categories without GAFAM acquisitions, is correlated with a slowdown in the number of new acquirers acquiring in that category. Overall, we find that technology acquisitions do not shield GAFAM from competition, at least not from other GAFAM members or other firms that acquire in the same categories.
Keywords: No keywords provided
JEL Codes: G34; L40; O33; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Acquisition of innovative targets (O36) | Reduced market entry by competitors (D49) |
| Acquisition (G34) | Reduced product development of the target firm (L15) |
| Acquisition of nascent firms (M13) | Reduced incentive for new market entrants (D43) |
| Size and activity of GAFAM (L25) | Acquisition behavior (G34) |
| Top 25 private equity firms (G24) | Competitive dynamic in acquisition strategies (L14) |
| GAFAM's acquisition strategy (acquire-adjacent-and-then-expand) (L22) | Broader category engagement (Y90) |
| GAFAM and other top acquirers acquiring in the same categories (G34) | Market behavior among these firms (L20) |
| GAFAM acquisition in a category (G34) | Slowdown in new acquirers entering that category (G34) |
| GAFAM acquisitions (G34) | Competitive pressures (L11) |