Bloomberg:
Apple has struggled for years to pull off bigger deals because of a series of quirks: an aversion to risk, reluctance to work with external advisers like investment banks and inexperience in closing and integrating large takeovers, said people who have worked on acquisitions with the company.
I don’t know if the article is correct but they don’t seem to take into account the fact that, as Tim Cook has often said, Apple buys companies for the usual reason but also because the company and people “fit” with Apple. That’s easier to do with a smaller company than it would be for a Netflix-sized acquisition.
merging company cultures is no joke, it’s harder than merging the accounting systems, and takes longer the more equal size the 2 companies are.
I suspect the beats acquisition went as well as it did because they took the music service in house and left the rest pretty much as their own company.
might work with netflix but i don’t think so.
Big deals are often simply wasted money. The deals tend to drive off the talent which propelled the company to start with and integrating the new company is often harder than building the same thing from scratch. Unless you have substantial assets like patents or capital or are buying out the competition to corner a market there is little longterm upside to big deals.
Strange article in the sense that I doubt Apple feels it struggles with making big deals. More that they are uninterested.
That said, I don’t completely buy the stuff about merging cultures. You don’t have to integrate 100%.
If Apple bought Adobe, for example, Adobe can stay Adobe but now they operate with some long term, first party knowledge about Apple’s road maps on products and processor/GPU plans (among many other benefits) and optimize for MacOS/iOS instead of optimizing for Wintel.
Adobe is very profitable and entrenched in business. They are not going anywhere, so this is such a better place for Apple to put its money than sitting in Ireland do nothing. Think of buying Adobe as putting $60 billion in a bank that makes $5 billion a year.
The value of the acquired company would take into account future profits, though. You’d have to pay a premium in any such deal and that only makes sense if you feel the acquisition would somehow increase the companies future profit potential.
Gruber did a fantastic take down of this, called “Investment Bankers Urge Apple to Spend Money Hiring Investment Bankers.”
They love to play “Let’s You and Him Fight.”
Remind me again why everyone needs to buy everyone just because… they… could?! What’s so wrong about Netflix staying Netflix and Apple staying Apple, each concentrating on their own thing? Seems to be working out pretty well for each of them.
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Shareholders get restless when ‘things’ don’t happen according to their expectations. By market cap, Apple is the largest company, but often they still operate, and almost to a fault still think, like a small startup. As they transition to a blue chip company, they will need to make deals that help bring in new revenue and eliminate competition (Beats aka Apple Music). Being stagnate is never a wise strategy, despite the old motto, “if it ain’t broke, don’t fix it.” Like it or not Apple will need to alter its paradigm if they want to graduate to the ‘next level’, whatever that may be. They are charting new territory here and past models (Sony) won’t be very useful to them.
While I can understand that reasoning in the abstract, it still makes little sense to me intuitively/in practice. I know that shareholders want growth, but nothing can grow indefinitely. Gobbling up arguably unrelated businesses just for the purpose of growing seems ludicrous to me.
Apple should certainly diversify into different markets if they want to stay relevant; but supposedly that’s what they’re spending all their R&D money on to create new markets, instead of merging with existing companies in existing markets just for the sake of it.
i’m with you on this. I read the piece and it’s advocating for investment bankers. IBs are pissing and moaning about Apple’s refusal to use them. And since Apple’s the most ‘eligible bachelor’ (for lack of a better analogy), Apple represents the holy grail of M&A because they are relatively young, filthy rich and potentially a bit naive.
Apple’s DNA contains a maverick spirit and I don’t expect them to capitulate to IBs. They prefer an organic approach to courtship and marriage. This is good for now, but if they ever wants to graduate to a blue chip company, a la IBM, then they will likely need to hire IBs to streamline the process, so they can focus on products and services.
I don’t think Apple or its customers would benefit from Netflix, Amazon Prime or even Amazon purchase. These rumors of Apple getting into content production annoy me because it seems like such a precarious direction. I can’t help but think what happened to Sony after their Walkman success, them purchasing CBS Records & Columbia Pictures. Diversification sapped Sony’s energy and focus. Now look where they are.
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