Big Tech will look to avoid regulatory scrutiny with broad portfolios - Wells Fargo
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Wells Fargo internet merger expert Bob Peck said Tuesday that the increased regulatory scrutiny on Big Tech will force companies to build diverse product portfolios rather than trying to concentrate in a single area.
Speaking to CNBC, the Wells Fargo chairman of global internet investment banking also suggested that regulatory reaction to Microsoft's (NASDAQ:MSFT)
$69B deal to acquire video game maker Activision (NASDAQ:ATVI) will help set the tone for upcoming deals in the sector.
"You haven't seen some of the Big Tech deals in the last year or so because of that increased [regulatory] scrutiny so I think any deal that is announced and moves towards getting done is going have some pretty sound footing there," he said.
Given the added regulatory risk, unexpected players might step into new verticals in an attempt to expand their horizons without raising antitrust eyebrows, Peck predicted.
"You're seeing a lot of the large tech players really diversify their portfolios, from being involved in OS systems, cloud, enterprise, gaming, etc. and really playing across a spectrum and not really creating a monopoly or concentration," he noted.
Commenting on the M&A landscape in general, Peck sees reasons why 2022 can build on a record year in 2021. Specifically, he pointed to interest rates, which he says remain "affordable" despite the prospects of a more hawkish Federal Reserve.
In addition, Peck highlighted the fact that many companies have large amounts of cash on their balance sheets -- "a lot of dry powder" they can use for acquisitions.
Want more perspective on the MSFT-ATVI merger? See why SA contributor Petar Mirkovic calls the transaction "the greatest deal of the video game industry."