20 Game Changing Consumer Tech M&A Deals

In hindsight, it’s relatively easy to point to a few consumer tech acquisitions that seemed crazy at the time, but ended up being prescient bets on future tech trends and growth areas.

These include the much-discussed acquisitions of Android, YouTube, Skype, and Paypal, among others.

We analyzed more recent consumer tech acquisition and identified those we believe will have the most impact on the tech industry going forward. These acquisitions marked major turning points for the technology involved, a significant strategic bet by acquirer, and/or were notable simply for the transaction’s size relative to the target’s potential.

Note: This analysis only includes first exits of private companies. The list is in alphabetical order by company acquired.  

Apple Acquires Beats Electronics

Apple’s acquisition of Beats for $3B in 2014 was the largest disclosed acquisition the company has made to date. Apple, which revolutionized the music industry when it released the iPod and iTunes, has fallen behind as music streaming began to dominate consumer consumption habits and led to the rise of Spotify, Rdio, and Tidal among others. The new Apple Music app, based in parts on Beats’ technology, could be a serious contender. The fate of Apple Music will help determine the fate of the other streaming music players, and  the music industry’s future. Apple Music has 11M trial subscribers after its first five weeks, with a 79% retention rate, according to the company. But Apple Music will have to ramp up its user acquisition significantly to succeed.

Sources: The Motley Fool, CNBC

Paypal Acquires Braintree/Venmo

Peer-to-peer mobile payments app Venmo was acquired by Chicago-based mobile and online payments processor Braintree in 2012 for $26M, and Braintree was later acquired by Paypal for $800M in 2013. Venmo processed $700M in payments in Q4’14, up from $141M in Q4’13. Braintree is also a key factor in Paypal’s global expansion plans, since the acquired company is popular among international merchants and integrates easily into online and mobile-only startups. Braintree processed $22.8B payments in 2014, more than double the previous year’s amount. This acquisition was key for Paypal, which now operates two major players in both the P2P payments and mobile payments spaces after spinning out of eBay.

Sources: Yahoo Finance, Small Biz Trends, Fortune, Bloomberg

Didi Dache and Kuaidi Dache Merge

Didi and Kuaidi Dache, the largest car-hailing players in China’s market, have merged together to form a $15B ride-hailing giant. This move is especially significant as Uber raises $1B+ in capital to move into the country. Didi and Kuaidi Dache have now formed a united front, when they were previously involved in a costly pricing war with each other. China, one of Uber’s most important target markets, will now be one of the toughest battle grounds in ride-hailing.

Sources: Forbes, Fortune

AOL Acquires The Huffington Post

AOL acquired The Huffington Post for $315M in 2011, solidifying the company’s bet on content and advertising. The Huffington Post was one of the first crowd-sourced news platforms, allowing many people and bloggers who were not full-time employees to use HuffPo as a medium for their views (a model that Jonah Peretti, one of The Huffington Post’s founders, would also use in his later venture, Buzzfeed). The Huffington Post was also  an important player in the wave of media companies monetizing through digital ads rather than subscription or paywalls, which has fundamentally changed that industry. When it was acquired, HuffPo had revenue of approximately $30M, while this year it projected revenue is $168M.

Sources: FiveThirtyEight, NYTimes, Wall Street Journal

Facebook Acquires Instagram

Instagram was bought for $1B in 2012, and some commentators derided the acquisition of a company with no revenue. But since then, other consumer tech acquisitions have soared in value — see Facebook’s WhatsApp acquisition below as Exhibit A. Not to mention, Instagram has begun to roll out high-performing ad units. Facebook’s bet is now looking smart. Instagram is projected to do $595M in mobile ad revenue this year, and had 300M users (which is about the same as Twitter) in December 2014 compared to 30M when Instagram was acquired. The bet on Instagram was also a larger part of Facebook’s early strategy of shifting it’s focus to mobile, where it now generates 76% of it’s ad revenue.

Sources: Techcrunch, eMarketer, CNN

Kakao and Daum Merge

Kakao, maker of South Korea’s top messaging app, and Daum, one of the country’s largest internet portals, merged to form the $9.5B Daum Kakao. The new company creates a serious rival to fend off competition from WeChat and Line Corporation, a company spun out of the larger NHN Japan. This merger illustrates the high stakes involved in the messaging wars happening outside of the US, where controlling the market share is key, since messaging functions as an “all-in-one” platform for other services, including commerce, gaming, and payments.

Sources: Techinasia, Bloomberg, Techcrunch

LinkedIn Acquires Lynda.com

LinkedIn’s acquisition of online learning platform Lynda for $1.5B in April 2015 was one of the few unicorn exits of 2015 (despite the overall number of unicorn companies valued at $1B+ jumping to new heights). This acquisition is significant for a few reasons.

• First, it’s LinkedIn’s largest disclosed acquisition of all time.
• Second, it’s the biggest VC-backed education technology exit of the last decade (first exits only).
• Finally, Lynda fills an important gap for LinkedIn, which links together jobs to people with those relevant skills. Now with Lynda, users have a direct platform to develop those skills and earn credentials, furthering LinkedIn’s reputation as “your online resume”.

Sources: Recode, Pando

Intuit Acquires Mint

Intuit, known for its software platforms Quicken, TurboTax, and Quickenbooks, acquired Mint.com for $170M in 2009, just three years after the company launched. Braving through the recession, Mint became a popular personal finance app, which challenged Quicken’s dominance of the field by putting an emphasis on UI/UX and ease of use. Intuit acquiring Mint was one of the first startup acquisitions in the personal finance space, which has gotten especially hot in recent years. Intuit’s acquisition was smart because it removed one of their biggest competitors, brought a design focus to their products, and widened the potential pipeline of customers moving from their personal finance platforms to other relevant software such as TurboTax. Mint’s user base has also grown significantly, from 1M at the acquisition to more than 13M in 2013.

Sources: Techcrunch, Kissmetrics, Business Insider

Microsoft Acquires Mojang

Microsoft bought Mojang, the maker of wildly popular game Minecraft, for $2.5B at the end of 2014. Minecraft was entirely bootstrapped, proving you don’t need to raise money to be a unicorn and exit at $1B+. The acquisition highlighted Microsoft’s new strategy of focusing on mobile-centric products, and bolsters Microsoft’s gaming product line. Microsoft already has an enviable perch in the gaming industry given the Xbox, desktop, and VR platforms it currently owns. The acquisition also gives Microsoft a channel into the younger demographics that Minecraft targets, specifically people below the age of 15, and could easily become a multibillion dollar franchise on its own, similar to the multimedia empire that Lego built. Finally, watching how Microsoft handles Minecraft going forward will be important, since it not only has to handle the game itself, but needs to make sure that the community that’s developed around the game is maintained (a struggle many large companies face when acquiring community-centric startups).

Sources: Wired, Wharton, ZDnet

Google Acquires Nest

Nest, the smart home thermostat company, was bought by Google for $3.2B in early 2014. Not only did the search giant pick up Nest’s founder Tony Fadell, in the past one of Apple’s top product designers, but it also made a significant foray into the home-automation and smart home spaces. Furthered by the subsequent acquisition of Dropcam, Nest represents an entire division within Google’s parent company, Alphabet, to introduce consumer tech into homes, and capture data/and provide services during those moments when you’re not on your smartphone or computer. The acquisition also represented a win for the beleaguered greentech industry, putting a spotlight on energy saving and energy data analytics.

Sources: Wired

Facebook Acquires Oculus

Facebook bought Oculus for $2B in 2014, with the VR company raising only $93M prior to the deal. Virtual reality is still a nascent field, but with the acquisition of Oculus, Facebook has positioned itself to be leader in the category. Facebook was quickly followed by other major tech corporations including Samsung, Microsoft, and Google — all quickly announcing their own version of VR headsets. The Oculus acquisition also represents Facebook’s interest in venturing into cutting-edge, unproven technologies (another major project is Facebook’s solar-powered UAV, Aquila). Oculus is slated for consumer release in early 2016, and will represent Facebook’s first consumer hardware for purchase, though its success is of course to be determined.

Sources: MIT Technology Review, Techcrunch, Facebook Announcement

Twitter Acquires Periscope

Periscope was acquired for approximately $100M in March 2015, and Twitter officially released the app after mobile live video-streaming competitor Meerkat unveiled theirs at SXSW a few weeks before. Periscope had 1 million active accounts after its first 10 days, and now has 10 million as of August 2015. Periscope is a proving ground for whether or not a large audience exists for live mobile video streaming. The company has already created problems for high-value live events (such as the Floyd Mayweather vs. Manny Pacquiao boxing fight) but also has the capability to transform industries such as news or content as a whole. It will take time to see whether or not Twitter’s bet will pay off, and whether Periscope will succeed in its battle for market share against Meerkat.

Sources: Techcrunch, The Verge, Fortune

Tencent Acquires Riot Games

Tencent acquired a majority stake in “League of Legends” game studio Riot Games in 2011, when the company had 1 million total active players and estimated revenue of $50M. League of Legends generated over $1B in revenue in 2014 with 67M people playing per month according to the studio’s website. This was one of the largest cross-border game acquisitions of its time, and the bet has more than paid itself off.

Sources: PC Mag, St. Louis Business Journal, PC Gamer, Forbes

Softbank Corp. Acquires Supercell

Japanese telecom giant Softbank bought a majority stake in game company Supercell in 2013 for $1.5B, when Supercell had yearly revenues of approximately $570M. In 2014 Supercell had revenue of $1.7B and also more than doubled its earnings to $565M compared to the year prior. Softbank also increased its holdings in the company to 73%. Supercell is now a $5.5B company that marks one of the few breakout successes in mobile gaming, a field VCs have typically avoided investing in.

Sources: Reuters, Venturebeat, Techcrunch

Amazon Acquires Twitch

Amazon bought Twitch for around $1B in 2014 after beating out other suitors like Google. This move is significant for several reasons:

• It legitimizes the growth of e-sports as a sector — i.e., watching video games as a spectator sport — and gives Amazon excellent positioning to become a major player in this category. Amazon’s acquisition could prove to be extremely prophetic if the market for e-sports continues to grow.
• It also continues Amazon’s strategy of moving into media content, alongside investments in Amazon Instant Video and  original programming.
• Twitch’s growth has continued. When Twitch was acquired, it already had 55 million unique viewers in the month, and 6 months after the Amazon acquisition was already seeing 100 million monthly visitors. Twitch currently takes more of total revenue share for gaming videos than YouTube according to a report by Superdata.

But with YouTube launching a competitor, YouTube Gaming, this balance could shift in the future.

Sources: Wall Street Journal, Geekwire, Forbes, Superdata

Alibaba Acquires UCWeb

Between 2009 and 2013, Alibaba’s investments in UCWeb resulted in an ownership stake of 66%, and Alibaba bought the rest of the shares in 2014 in a deal valuing the company above $1.9B. Flush with cash from its IPO, Alibaba has made it clear that it plans to reinvest this money into growth by expanding into new areas, particularly in mobile and search. China has 54% 3G and 4G penetration in it’s overall mobile population of 1.29B people, but that proportion is growing and Alibaba is trying to position itself to take advantage of this. While the company has made a number of small investments in US companies (Lyft, Snapchat, etc.), it has kept focused on the Chinese market and has made several billion dollar deals to reinforce this, including UCWeb, AutoNavi, Koubei, etc. This acquisition also puts Alibaba in a position to acquire mobile market share from its competitor, Baidu. UCWeb commands 65% of China’s mobile search market, and also holds the largest mobile browser share in India.

Sources: Venturebeat, Forbes, NY Times, Alibaba Press Release

Twitter Acquires Vine

Twitter acquired short-video site Vine for $30M in 2012, just 4 months after it was created. Vine saw 34.5M unique US visitors in June, which was the same number as Snapchat. The service is making its first monetization play by acquiring the startup Niche, which matches Vine talent with brand advertisers, and has developed into a thriving social tool that has given rise to many influential Vine personalities. Vine also gives Twitter a foothold into younger demographics that might not turn the parent service as frequently — a youth-centric strategy furthered by Vine’s launch of the companion app, Vine Kids, aimed at a child audience.

Sources: Allthingsd, Quartz, Fortune

Google Acquires Waze

Google bought Waze for $1.3B in 2013, a strategic play for Google which solidified their mapping and navigation dominance. The purchase removed Google Maps’ main competitor, and was even investigated by US regulator Federal Trade Commission for violating anti-trust laws (which it later determined it did not). Waze’s user-generated data not only helps Google Maps with accuracy, but also adds a social and interactive layer to the already robust platform. And finally, Waze unrolled local ads onto the platform as a monetization move, which falls directly in line with Google’s core business and allows them to leverage their vast geo data to boost revenue. The acquisition was also a big win for Israel’s booming tech scene, and was one of the country’s largest tech exits.

Sources: Forbes, Techcrunch

Facebook Acquires Whatsapp

Facebook is getting very serious about messaging. Before they removed messaging from the main app, and relaunched Messenger as a third-party developer platform, Facebook acquired WhatsApp for a head-turning $19B in 2014. The company had 450M users when it was acquired, and broke 800M MAUs in April 2015, with most of their user base outside the US, instantly giving Facebook massive user and penetration growth in messaging markets globally. Facebook has still not significantly monetized WhatsApp (other than a modest preexisting subscription revenue stream), and has guaranteed it will be ad-free (which runs against the grain of its core business). One possible method for WhatsApp monetization will be “business-to-consumer” messaging, which is already being tried in Messenger. In this, Facebook is taking a page from the strategy of its Asian messaging competitors like Line. Facebook bought WhatsApp at a huge price tag returning solo-backer Sequoia’s fund many times over, and led other VCs to search for their “WhatsApp exit”.

Sources: Techrunch, The Motley Fool

Amazon Acquires Zappos

Amazon acquired Zappos for $807M+ in 2009 in one of the largest e-commerce acquisitions to happen after the dot-com era. The deal been fruitful for Amazon, which acquired a company that already had net revenue of $635M at the time of acquisition. Zappos has also carved a niche out for itself in e-commerce by emphasizing its company culture and obsessive customer service, the latter of which Amazon prides itself on today and has been a big differentiator for the parent company. It’s important to note that Amazon bought Zappos at a little more than 1x net revenue which is a much lower multiple than the valuation of many e-commerce companies today (with Amazon itself trading between 2x and 2.5x price-to-sales ratio of the trailing twelve months).

Sources: Wall Street Journal, Mashable, Ycharts, Forbes, Harvard Business Review

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