Will Twitter Get More Acquisitive After Its IPO? A Look at Facebook, Zynga and Groupon M&A Histories

With its initial public offering on the horizon, Twitter has been busy on the M&A front completing 31 acquisitions for both talent and technology since its founding. To get a sense for whether Twitter’s M&A pace post-IPO is likely to increase or decrease, we thought a look at the acquisition activity of a few other much-hyped consumer IPO predecessors – Facebook, Groupon and Zynga – might be instructive.

According to the data, Facebook and Zynga saw a decline of 48% and 73%, respectively, in acquisitions since going public.  Of the three, Groupon has kept its post-IPO acquisition pace relatively consistent with a more modest 10% decline in activity post-IPO.  Below are some pre and post-IPO M&A trends that CB Insights M&A data highlights for Twitter’s consumer internet brethren.

Facebook M&A Trends

Since its IPO in May 2012, Facebook has closed 16 acquisitions or acqui-hires ranging from mobile app development startup Parse to social stream reader Threadsy. That’s in contrast to the social network’s 31 pre-IPO acquisitions, of which nearly 3/4 occurred between 2010 and 2011.

Prior to its IPO, Internet Software & Services companies made up over 60% of Facebook’s acquisitions. But times have changed. Given the company’s stated focus and Wall Street’s interest in Facebook’s mobile strategy, 44% of Facebook’s post-IPO acquisitions have come in the Mobile Software & Services space, with several including Spool and Piecable aimed purely at acquiring mobile talent.

Pre and post-IPO, Facebook tends to acquire companies at the early-stage. Of Facebook-acquired companies with funding, the average amount of time between first funding and acquisition was 2.1 years. And on average, these companies raised just 1.7 rounds of funding. Investors in three or more startups acquired by Facebook include SV Angel, Sequoia Capital and Y Combinator.

Zynga M&A Trends

Like Facebook, game maker Zynga has also become less aggressive on the acquisition-front since its IPO (a stock price which has trended consistently down doesn’t help). While Zynga shelled out nearly $180M for its acquisition of “Draw Something” creator OMGPOP in March 2012, the company has not completed any acquisition of similar size since, and has seen activity on the M&A front dip as the company retrenches and figures out what it wants to be when it grows up. Prior to its IPO, Zynga completed 22 acquisitions in a span of just two years. But with a falling stock price and rocky transition to mobile gaming, the firm has disclosed only six new M&A deals since its IPO in December 2011.

While Zynga’s acquisition pace appears to have slowed drastically since its IPO, its preference for buy gaming companies has not. At the sub-industry level, all of Zynga’s post-IPO acquisitions including Spooky Cool and A Bit Lucky have been gaming startups. And prior to going public, gaming companies made up over 82% of Zynga’s acquisitions.

Companies acquired by Zynga, on average, raised just 2.1 rounds of funding with an average of 2.6 years between first funding and acquisition. Zynga has bought multiple portfolio companies from Bessemer Venture Partners (which has notched the most NY-based exits since 2009) and Silicon Valley-based Shasta Ventures.

Groupon M&A Trends

While Facebook and Zynga have scaled back their M&A activity, Groupon has not seen as material a decline.  Since its IPO, Groupon has gone through some dramatic changes, most notably, a move in the corner office from Andrew Mason to Lightbank founder Eric Lefkofsky. And in order to transform itself from a daily deals company (which has seen plummeting investor interest), Groupon has continued a strong push on the M&A front. Since going public in October 2011, the Chicago-based firm has completed 18 acquisitions, including three since the start of August 2013.

Interestingly, while 65% of Groupon’s acquisitions prior to its IPO originated in the eCommerce industry, just 22% have come within eCommerce since. More recently, the company has acquired companies in mobile travel (Blink), social gifting (Plumfare) and point-of-sale payments (Breadcrumb), highlighting its move away from daily deals toward new forms of local commerce.

While Groupon’s acquisition preferences may be changing by industry, Groupon – like Facebook and Zynga – has tended to acquire startups that raise their financing over just a couple rounds and which are relatively young.  Looking prior to and after its IPO, Groupon-acquired startups with funding raised an average of 1.9 rounds. The average time between first funding and acquisition was 2 years. And there are five investors who’ve invested in two or more of Groupon’s acquisitions including SV Angel, RRE Ventures, True Ventures, Betaworks and SoftTech VC founder Jeff Clavier.

Facebook, Zynga and Groupon all have had some missteps in their lives as public entities which may have had an impact on their M&A activity. As a counterexample, LinkedIn which has “crushed it” since going public has actually more than doubled its M&A activity since going public. And so, Twitter’s post IPO M&A pace will likely hinge on the public market’s receptivity to its IPO and it’s post-IPO performance.