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At the end of 2010, the top 5 public companies held $125B in cash on their balance sheets. At the end of 2011, that figure nearly doubled to $230B. The next 12 to 24 months will be a fruitful time for M&A as publics look to acquire growth and technology to compete in different markets. The stakes are so high because market caps are huge. Tech companies are now some of the largest companies by market cap and to justify their valuations, they must compete for growth to sell to the street and investors.

Company Cash on Balance Sheet in $B Market Cap in $B
AAPL 81.6 444
MSFT 52 257
GOOG 44.6 198
ORCL 31.0 144
IBM 11.9 224
FB (post-IPO) 9
TOTAL 230

Apple, Google, Facebook and Microsoft are aggressively competing in mobile by acquiring UI technology (Siri), patents (Motorola, IBM, et al). In the next few months, I expect acquisitions in mobile ad technology, mobile cross platform development technology (HTML5), payments and potentially ecommerce. Additionally, startups serving these sectors will  likely be approached by financial services companies, carriers, OEMs and others who want a bite of the same pie.

Oracle, Salesforce and SAP are competing in software-as-a-service and starting from their core strengths (database, CRM and BI respectively) and branching out to provide suites of solutions that now include talent management (Taleo, SuccessFactors), commerce (Endeca, Art, DemandTec) and many others. Smaller SaaS companies like Concur, ConstantContact must also respond with acquisitions to win share.

I think 2012 will be a huge year for M&A. With lots of cash to bandy about, lots of market share and growth to changing hands through disruptive change, fireworks are bound to be lit. And champagne bottles opened. Which companies do you think are most likely to be acquired?

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2 thoughts on “The 2012 M&A powder keg

  1. Here are few companies I think may be ready for acquisition in 2012 in consumer Web space.

    Task Management: Asana.com , Trello.com
    Q&A sites : StackExchange , Quora ( they may not like it unless huge valuation )
    Social sharing : Instagram.com

  2. Pingback: The increasing importance of building a stand alone business « ex post facto

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