Giant tech companies are going to go after “unbelievable acquisition opportunities,” according to Goldman Sachs’ president Gary Cohn.
He said that when companies’ multiples are based on eyeballs, or users, they can’t be acquired by companies whose multiples are based on earnings, because “it’s too dilutive.”
That is changing.
“One of the tell-tale signs that we’re getting close to the bottom will be a big deal — $20, $30, $40 billion,” Cohn told Lessin. “If a company can pull it off and their stock isn’t penalised, we’ll know the valuation multiple for the market.”
Private tech companies that have reached the coveted billion-dollar “unicorn” status have been struggling to raise capital.
Cohn said that next what happens is “the bigger get bigger.”
In other words, a shakeout is coming that will determine which tech companies will survive and which are destined to fail.
Speaking in Davos in January, Cohn said, “the marketplace will separate the winners from the losers. They will fund the winners more efficiently than they will fund the companies whose business model is less secure.”
He said that Goldman Sachs views the funding slowdown as “a great opportunity” for the firm.
“We’ll go out and raise capital for them,” he said.
Cohn said on a recent podcast that he’s seen a change in Silicon Valley in the past three or four months, where many companies are shifting their focus from growth to the bottom line and revenue creation.
“It’s actually a positive thing,” he said.
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