Frank Quattrone has been investing in technology companies since the 1970s, so when he makes a rare public appearance to comment on the current state of the industry it’s worth taking a listen.
Today at the Web 2.0 Summit, he took a few minutes to comment on the current state of mergers and acquisitions. His company Qatalyst Partners has handled several recent high-profile buys, including Isilon’s purchase by EMC and the eventual sale of 3PAR (after a bidding war that worked out very well for the company) to HP.
For the last 25 years or so, specialisation has been the rule. Intel made chips, Microsoft made operating systems, EMC made storage, Oracle made databases and so on. So when startups were looking to be acquired, they generally had to stay within their sector, meaning you’d have one or two possible buyers.
The new leaders in the tech space, like Apple, Amazon, and Google, are much more comfortable going across sectors, and the old guard is following along–Oracle’s trying to build an entire application stack through acquisitions. Consequently, if you’re a networking company you’re not just going to be bought by Cisco…you could be bought by Oracle, Dell, HP, or any of a half dozen other companies.
There’s also a ton of cash sitting on big tech companies’ balance sheets–Microsoft, Apple, and Google each have more than $20 billion. That’s not earning any return for their shareholders.
In other words, look out for a continued acceleration in M&A in the tech sector, particularly in cloud computing and its relatives, like software-as-a-service and virtualization. As likely buyers, he mentioned HP, Dell, Google, and IBM–which has already said it plans to spend $20 billion on acquisitions by 2015.