Mergers in the Digital Economy

36 Pages Posted: 3 Feb 2020

See all articles by Axel Gautier

Axel Gautier

University of Liege - Research Center on Public and Population Economics; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Joe Lamesch

HEC-Management School of the University of Liège

Date Written: 2020

Abstract

Over the period 2015-2017, the five giant technologically leading firms, Google, Amazon, Facebook, Amazon and Microsoft (GAFAM) acquired 175 companies, from small start-ups to billion dollar deals. By investigating this intense M&A, this paper ambitions a better understanding of the Big Five's strategies. To do so, we identify 6 different user groups gravitating around these multi-sided companies along with each company's most important market segments. We then track their mergers and acquisitions and match them with the segments. This exercise shows that these five firms use M&A activity mostly to strengthen their core market segments but rarely to expand their activities into new ones. Furthermore, most of the acquired products are shut down post acquisition, which suggests that GAFAM mainly acquire firm's assets (functionality, technology, talent or IP) to integrate them in their ecosystem rather than the products and users themselves. For these tech giants, therefore, acquisition appears to be a substitute for in-house R&D. Finally, from our check for possible "killer acquisitions", it appears that just a single one in our sample could potentially be qualified as such.

Keywords: mergers, GAFAM, platform, digital markets, competition policy, killer acquisition

JEL Classification: D430, K210, L400, L860, G340

Suggested Citation

Gautier, Axel and Lamesch, Joe, Mergers in the Digital Economy (2020). CESifo Working Paper No. 8056, Available at SSRN: https://ssrn.com/abstract=3529012

Axel Gautier (Contact Author)

University of Liege - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32-10-47.43.01 (Fax)

Joe Lamesch

HEC-Management School of the University of Liège ( email )

Rue Louvrex 14
Liege, 4000

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