Why the tech giants have CEOs running scared | FT Big Deal

It sounds like a cliche but the one word
keeping chief executives up at night is disruption. If you’re the CEO of a big
company all it takes to get you paranoid is to hear that Amazon is about to
invest in your sector. For example when Amazon acquired online pharmacy PillPack for less than a billion dollars last year leading brick-and-mortar
rivals Walgreens and CVS instantly lost 11 billion dollars in market value. So
it’s no surprise that CVS spent 69 billion dollars to buy health insurer
Aetna. Why do they do that? It was a clear response to Amazon’s
plans to enter the business of selling prescription drugs online. The fear that
Amazon or other tech giant’s such as Google, Facebook, Apple or even Uber can
muscle their way into any sector is forcing legacy companies to take risky
bets on big acquisitions. That’s the only way they can stay relevant and fight the
disruptors. For example, IBM made its biggest acquisition in its 107 year
history by buying an open-source software company called Red Hat for
thirty four billion dollars the logic of this deal is very simple. The lucrative
cloud computing business is dominated by Amazon Web Services and Google if IBM
wanted to catch up in this business it needed to make a big acquisition. The
other big disruptor has been Netflix the TV streaming company has forced a number
of telecom and media companies to forge new alliances to stay relevant in their
businesses. Boring telecom company AT&T agreed to pay a hundred and eight
billion dollars to buy Time Warner that’s the owner of HBO and CNN. Last
year Disney and Comcast entered into a bidding war to buy most of Rupert
Murdoch’s 21st Century Fox. At the end disney prevailed but still comcast ended
up buying european broadcaster Sky. We should expect more of these kinds of
deals. Cash is cheap due to historically low interest rates and many companies
have a ton of extra cash on their balance sheet thanks to Donald Trump’s
corporate tax cuts. This tax bill is incredible. The conditions to make big
deals are as good as ever.

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9 thoughts on “Why the tech giants have CEOs running scared | FT Big Deal

  1. Well, thanks to the South Dakota V. Mayfair decision in 2017 Amazon is not the disruptor it once was. The Supreme Court took away Amazon's biggest advantage (no sales tax). Now Amazon has to charge and collect sales tax on every item, which means it could be the same price or cheaper to buy an item locally instead of buying from Amazon.

  2. the tax cut is one thing the US capital inversement and GPDI also increase by billions , but I prefere that capital being spend in the US than in china or somewhere else , thats also why the president have to get the that deal with china to keep the flow of capital in the US and not translated into so much deficit increased like it happened before , then he should go after cheap labour immigration and increased wages which is already happening but it can be much better , if you get buy out is up to you and probably is better but that will give the people that got the cash or stocks the leverage and confident to invest into something else which will create more jobs and economic activity

  3. more acquisitions and mergers, less competition, higher prices, even worse life for an average Joe, who has not seen a wage increase since 1980s in real terms

  4. Nationalise the tech companies.

    They're monstrosities who are killing customer freedom, personal choice and diversity in media.

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