With September just about to end, Microsoft came close to setting records in Q3 2021 with seven deals, including six 100% acquisitions as well as taking a $5mn stake in Oravel Stays (trading as OYO Rooms).
This number is just one below to the highest number of acquisitions quarter-on-quarter in the company’s history. As per GlobalData’s database records, Microsoft announced a total of 17 deals in 2018 and in Q2 of the same year recorded eight deals, the single quarter with the highest number of acquisitions in Microsoft’s history. This quarter is now followed by Q3 2021 with seven deals.
Microsoft selects companies under diversified themes
In technology, media, and telecom (TMT) sector, Accenture leads in acquiring companies followed by Microsoft in Q3 2021. Accenture has made numerous strategic investments over the past two years as it seeks to enhance its IT services capabilities, especially in the field of cloud and professional services.
Microsoft has a different strategy, with its acquisitions covering a broad number of themes. For example, this quarter the giant has invested in cybersecurity (RiskIQ, CloudKnox Security), cloud (RiskIQ, CloudKnox Security), networking (Peer5), digital media (TakeLessons, Clipchamp), AI (Suplari), big data (Suplari), and ecommerce (Oravel Stays) with its acquisitions.
Microsoft is known for big deals and 2021 follows this trend
Microsoft is well known for making outsized acquisitions and 2021 has very much followed this trend. In 2021, Microsoft acquired Nuance Communication, a speech synthesis and speech recognition company. GlobalData predicted Nuance Communications (Nuance) would be an acquisition target in a report published on 15 January 2021 (‘M&A in TMT – 2020 Themes’).
Nearly three months later, Nuance was acquired by Microsoft for a total deal value of $19.7bn. That makes Nuance Microsoft’s second-largest acquisition, following LinkedIn for $26bn in 2016. Skype Technologies, ZeniMax Media and GitHub deal represent the third, fourth and fifth biggest deals respectively in the company’s history. In March 2021, its $7.5bn acquisition of the video game studio ZeniMax was approved by the US Securities and Exchange Commission and the European Commission.
Around the same time, Microsoft completed its acquisition of the Marsden Group, an industrial technology innovation and rapid prototyping company. More importantly, these high value deals would suggest that Microsoft is not finished with its acquisitive growth strategy.
Taking advantage as antitrust watchdogs target rivals
Four leading tech giants, namely Apple, Amazon, Google and Facebook are attracting greater scrutiny from antitrust watchdogs and other governmental bodies, including the DoJ and FTC on data privacy concerns as well as concerns over excessive market power. These complaints even may lead to unwinding of previous large acquisitions but could make approval of future deals more challenging.
Facebook had planned to buy Giphy, one of the world’s largest GIF libraries, but following an investigation the UK’s Competition and Markets Authority (CMA) has raised competition concerns about the acquisition. If these concerns are confirmed, Facebook could be forced to unwind the deal and sell off Giphy.
To avoid any further regulatory challenges, these giants will need to be more cautious with future large-scale acquisitions. Google was also blocked from acquiring TikTok’s U.S. assets due to regulatory concerns. Microsoft has avoided this level of scrutiny, as the company claims to keep data secure and has not recently been the subject of concerns over market dominance. This provides a good opportunity for Microsoft to continue with its acquisitive growth strategy.
As new technologies continue to emerge under innovative companies, Microsoft will be watching and picking winners. With one more quarter left for 2021 to complete, we must wait and see what and how much more Microsoft is willing to spend on deals.