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The Game of Thrones in the digital world

Mun Yi Lee, Associate at Olswang Asia | April 10, 2014
The M&A activity in the technology sector looks likely to continue throughout 2014, as the biggest names in technology industry are aware of what is at stake in a winner-takes-all market.



It is the dream of many technology startups for their software to be sold to cash-rich companies or to go public at a huge premium for the founders. The latter is often a difficult path, as few technology companies generate sufficient stable revenue or are sufficiently well-known to consumers to warrant encouraging responses to a public offering. This is particularly true for those which operate back-end technology that consumers may not be aware of.

Technology startups should take heart that despite concerns swirling about a "tech bubble" on the horizon, there is no slacking of appetite in the IT industry to acquire fast-growing technology startups. The rivalries among the technology industry's giants have often been likened to a "Game of Thrones", in which companies such as Facebook, Google, Amazon and Apple try to expand their business by encroaching on one another's empires. 

The IT industry has acknowledged that consumers are the driving force behind innovation and developments in the technology industry. In the name of consumerisation, many technology giants are willing to fork out jaw-dropping sums to increase their user base. Competition among the biggest technology companies in the world has been keen, as they all try to increase their business margins and 2013 saw a spate of acquisitions which resulted in the technology sector having its highest value in M&A activities in 6 years at US$166.2 billion.

Each company has developed its own strategy and business model.

In the US, 2013 was a busy year for Google, which acquired nearly 20 companies. Google appears to be looking at alternative revenue streams, departing from its habit of acquiring only technology companies, with a shift towards hardware. Google's interest in the robotics and artificial intelligence sectors does not appear to have waned as it recently announced that it had bought Nest Labs (a home automation company) for US$3.2 billion, DeepMind (an artificial intelligence company) for more than US$400 million and Impermium and SlickLogin, both companies specialising in Internet security.  

Facebook has set the industry atwitter (pun intended) with its announcement on 19 February 2014 that it would be snapping up WhatsApp, a mobile instant messenger for US$19 billion. The social networking company has been anxious to increase its monetisation of its user base since its IPO and had a busy year in 2013, implementing inorganic growth to build out its mobile offering buying mobile software and analytics businesses. Amazon has focused on its core business as an online retailer, by adding complimentary services to its portfolio, whilst Apple had acknowledged that it is making acquisitions to access talent as well as complimentary intellectual property that it wants to integrate into its hardware or software.


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