When we examine every year of corporate mergers and acquisitions, it's tempting to highlight the biggest and most fantastic deals - and there have been many in 2020. I've written about 34 acquisitions so far this year. Of those, 15 were worth $ 1 billion or more, 12 were small enough not to require companies to disclose the price, and the rest fell somewhere in between.
Four deals involving chip companies coming together for a total of over $ 100 billion alone. While no one does jaw-dropping M&A like the chip industry, other industries have also offered their own eyebrow-raising deals, led by Salesforce which bought Slack earlier this month for $ 27.7 billion.
We are likely to see more industries consolidating as chips did in 2020, although probably not in a dramatic or expensive way.
Yet despite the drama of these larger numbers, the most interesting targets for me have been the minor pandemic-driven deals that started popping up in May. These small acquisitions are the ones so insignificant that the company does not have to publicly share the purchase price. They usually involve early stage companies being absorbed by cash-rich companies looking for a combination of missing technology or engineering talent in a particular area like security or artificial intelligence.
It has certainly been a busy year for mergers and acquisitions, and we may not have seen the last one yet. Let's take a look at why those smaller deals were so interesting and how they compared to bigger ones, looking ahead to what M&A could look like in 2021.
Early stage blues
It's always difficult to know exactly why an early-stage startup gives up its independence by selling to a larger entity, but we can certainly speculate on some of the reasons why this year's quick negotiation started in May. While we can never know for sure why these companies decided to exit via acquisitions, we do know that in April the pandemic hit full steam in the United States and the economy began to shut down.
Some startups were particularly vulnerable, especially cash-strapped companies in the April period. Of course companies go bankrupt when the funds run out, and we started seeing early stage startups raising the next month.
We don't know for sure, of course, if there is a direct correlation between the economic woes in April and the flurry of deals that began in May, but we can reasonably assume there was. For a certain percentage of them, I guess it was a clearance sale or at least a deal made on less than ideal terms. For others, perhaps they simply didn't have the means to move forward in such adverse economic conditions or the partnerships were simply too good to pass up.
It's worth noting that I didn't cover any contracts in April. But, starting May 7, Zoom bought Keybase for its cryptographic expertise; five days later Atlassian purchased Halp for integration with Slack; and the next day VMware bought Octarine, a cloud-native security startup, and off we go. It's true that large companies have benefited from making these acquisitions, but the timing has stood out.
