A whack-a-mole M&A strategy
ABOVE: U.S. Federal Trade Commission Chair Lina Khan
BY:
Catherine Nicci
Legal Affairs Analyst / Reporter
PROJECT COUNSEL MEDIA
23 August 2022 (Washington, DC) – We’re learning how Amazon plans to deal with Federal Trade Commission Chair Lina Khan’s anti–tech acquisition policy – by striking so many deals that the FTC will have a hard time fighting them all. You could call it the whack-a-mole M&A strategy.
That’s one interpretation of last Sunday’s news that Amazon is a bidder for Signify Health, a health analytics company with a market capitalization of $6.6 billion. The bid follows Amazon’s deals to purchase the One Medical chain of primary care clinics and iRobot, maker of the Roomba robot vacuum cleaner, over the past few weeks.
And those two acquisitions were in addition to Amazon’s $8.6 billion purchase of MGM earlier this year. There’s no certainty Amazon will succeed in its bid for Signify: it faces competition in the bidding from UnitedHealth and CVS, according to an analysis in The Wall Street Journal and Corporate Finance. But if it wins, Amazon will have spent more than $20 billion on acquisitions this year, roughly 10 times its acquisition spending in each of the past three years. Amazon can easily afford that outlay – it had $60 billion in cash and marketable securities as of 30 June. Moreover, Amazon is striking while asset prices are cheap, so you can’t fault its timing.
But it is telling that CEO Andy Jassy has become so acquisitive at a moment when Khan has been getting more aggressive about blocking big tech deals – even suing to stop Meta Platforms from completing a $500 million purchase in virtual reality. Presumably Jassy wants to signal that he won’t let the government get in the way of Amazon’s expansion strategy. And he apparently sees healthcare as a big new source of growth that will fit in alongside the company’s cloud computing, entertainment and original e-commerce businesses. While he might be right, you have to wonder whether he can manage so many disparate businesses within the one organization. We’ll have a separate post later this week on how Amazon’s cloud computing is the biggest driver of its success.
But then there is the question of how investors will respond long term. Historically, the stocks of conglomerates don’t reflect the full value of each of their parts, which is why so many end up breaking into different pieces. Jassy may want to show Lina Khan who’s boss, but striking so many deals is not necessarily in shareholders’ best interests.
Stay tuned.
