In today’s market with ever-changing technology, companies are continuously looking for ways to stay competitive and increase wealth. In past few years, billion dollar acquisitions have become increasingly popular as more companies are using them to get ahead or to keep up with competition. Right now a Tech bubble is forming as a staggering numbers of companies are ranked in the billion dollar range. This is because major companies are acquiring companies for billions of dollars to have that competitive edge.
One could say that a billion dollar company was formed every three months before, but now it’s every two months. For instance, there are around four billion dollar software companies created yearly. These days, the some companies are amassing ten figures or well-over a billion dollars so they are worth a lot of money to other major businesses.
The many acquisitions are leading to a lot of speculation and questions. Some research vendors, including financial investors are asking: What sort of competitive moat are they building? Can this last? Is this another Tech bubble?
This article is too short to cover all these topics, but the long and short of it is that one cannot really say how long this can or will last. Furthermore, most feel that this is another bubble as many of the billion dollar acquisitions are linked to the technology industry.
If you have been following what is taking place in the tech industry over the last few decades, then you will know that most of the twists and turns involved rivals like Microsoft-Google, Samsung-Apple, among others. This is not really surprising as the internet has opened the door for more opportunities, earn more money or build a highly successful business that is snatched up by a bigger company for billions. Gone are the days when most people only dream of selling businesses for one million bucks, as this is no longer enough for some.
An example of where a major company buys a smaller one that has great potential would be Google buying YouTube, the most popular video sharing site today. Google is also acquiring Waze, a small social mapping company that doesn’t have that much revenue, for over a billion dollars. However, Google is certainly not the only one to make this big move. Recent news shows Yahoo is set to acquire Tumblr, a blogging site, for about $1.1 billion. Some might say that this is a large amount to spend for a company that is generating millions in revenue, but Tumblr is fast becoming a social phenomenon with more than 100 million loyal users.
When all is said and done, acquisitions are critical to growth so companies will always pursue them despite the potential downsides. This is how bubbles form. It seems as if this bubble will continue as major companies build their billion dollar empire to have a competitive edge.
There are a staggering number of companies with billion dollar valuations lately.
Is this Tech Bubble 2.0?
Billion Dollar + Valuations
Fab – $1B Valuation.
Gilt Groupe – $1B Valuation.
Foursquare’s – $1B Valuation.
Square – $1B-$2B valuation
Spotify – $1+B valuation.
WhatsApp – Rumored $1B valuation.
Snapchat – Possible $1B Valuation
Airbnb – $1B.
Rovio – Turned down a $2B offer. Probably won’t sell for less than $3.
Path is near the $1B valuation.
Quora – Turned down one $1B acquisition offer.
Box.net – $1.2B valuation.
Evernote – $2B valuation.
Dropbox – $4B valuation.
Pinterest – Estimated to be worth $5B.
Twitter – North of $10B valuation.
Billion Dollar + Acquisitions
Facebook acquired Instagram for $1B.
Yahoo acquired Tumblr for $1.1B.
Salesfoce acquired ExactTarget for $2.5B.
Microsoft acquired Yammer for $1.2B.
IBM acquired cloud firm SoftLayer for around $2B.
Google is trying to acquire Waze for more than $1B.
And there are hundreds of deals being made in the hundreds of million dollar range.