70% ownership of the total M&A market.
9
Many of these corporate acquisitions
are motivated by the opportunity to obtain novel technologies for their own use
without the need to invest heavily in R&D. For corporations, this has become the
less risky (and quicker) path to addressing innovation.
Corporate acquirers have proven they are willing to pay for innovation, as
was demonstrated earlier in 2017 when Cisco acquired AppDynamics for $3.7
billion the day before the company's planned public offering. The acquisition
price represented an 85% premium over the company's $2 billion market
capitalization pricing target.
10
Other billion-dollar deals in 2017 include Intel's
acquisition of Mobileye for $15.3 billion, PetSmart's acquisition of Chewy.com
for $3.3 billion, and Red Ventures' acquisition of Bankrate for $1.4 billion. Old-
guard companies have recognized and embraced the need to innovate to
remain competitive as their industries are being affected by a rapidly changing
technology landscape.
The Resurgence of Corporate Venture Capital
The recent rise in corporate acquisitions has also led to a material
increase in Corporate VC with major companies investing in VC-style, early-
stage companies. Notable corporate investors, such a Google Ventures, Cisco
Investments, Dell Ventures, and Intel Capital, have played a significant role in
the VC industry for many years. However there has been a recent influx of new
Corporate VCs, ranging from convenience stores (7-Eleven) to financial firms and
car manufacturers (GM invested $500 million in Lyft) that stand out as the new
entrants to the market. From 2011 to 2017, the number of global active corporate
9
"Venture Pulse Q3 2017." KPMG Enterprise, 11 Oct. 2017, page 24.
10
Carson, Ed. "Cisco Systems Nabs AppDynamics For $3.7 Billion, Just Before IPO." Investor's Business Daily,
Investor's Business Daily, 24. Jan. 2017,
.
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