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> My understanding is that the vast majority of these M&A destroy capital. The FAANG stocks have very high compound annual returns stretching over more than a

> My understanding is that the vast majority of these M&A destroy capital. The FAANG stocks have very high compound annual returns stretching over more than a decade. I don't think there's evidence that those returns would be higher without their many acquisitions or evidence of capital destroyed. It can be argued that whether M&A on net is capital generative or destructive depends on the management team and their ability to successfully integrate the acquired company's team, products, and technologies. Which translates to bad management destroys capital, which is an obvious truism.

gregwebs 5y ago
I agree that returns would not be much different if they had avoided bad M&A. They have tons of cash and have to do something with it if they don't give it back to shareholders. Amazon has historically had the least amount of cash sitting around and thus has done the fewest acquisitions (FB may be less, but their market cap is smaller and their business is less diverse). I also agree that returns have been greatly improved by a few key acquisitions for Google (Double Click, Youtube) and FB (Instagram). For Apple and Amazon I don't know where they are benefiting from their M&A (this is likely my ignorance, I would be interested to know). I just think it makes more sense to focus on a few key (anti-competitive) acquisitions than to complain that big companies do hundreds of M&A deals over a couple decades.
- andrewjl 5y ago
  It's possible for a company to benefit from an M&A deal in a way that is not anti-competitive. > For Apple and Amazon I don't know where they are benefiting from their M&A (this is likely my ignorance, I would be interested to know). It's mostly around specific and niche tech in the case of Apple, which is a good example of the above IMO. Unless they involve tons of patents (which is not my impression) they aren't really anti-competitive. Other firms can develop this same technology should they wish to make the investment.

gregwebs 5y ago

I agree that returns would not be much different if they had avoided bad M&A. They have tons of cash and have to do something with it if they don't give it back to shareholders. Amazon has historically had the least amount of cash sitting around and thus has done the fewest acquisitions (FB may be less, but their market cap is smaller and their business is less diverse). I also agree that returns have been greatly improved by a few key acquisitions for Google (Double Click, Youtube) and FB (Instagram). For Apple and Amazon I don't know where they are benefiting from their M&A (this is likely my ignorance, I would be interested to know). I just think it makes more sense to focus on a few key (anti-competitive) acquisitions than to complain that big companies do hundreds of M&A deals over a couple decades.

andrewjl 5y ago
It's possible for a company to benefit from an M&A deal in a way that is not anti-competitive. > For Apple and Amazon I don't know where they are benefiting from their M&A (this is likely my ignorance, I would be interested to know). It's mostly around specific and niche tech in the case of Apple, which is a good example of the above IMO. Unless they involve tons of patents (which is not my impression) they aren't really anti-competitive. Other firms can develop this same technology should they wish to make the investment.