Beyond Killer Acquisitions: Are There More Common Potential Competition Issues in Tech Deals and How Can These Be Assessed?

How common are killer acquisitions in tech and are there alternative theories of harm that are likely to arise more frequently? We apply a set of filters to 409 acquisitions by the “GAFA” between 2009 and 2020 to identify transactions where the target firm could have plausibly threatened the acquirer’s “core” business and the valuation was large enough to plausibly mask a market power premium. We find that at most 14 percent of reviewed transactions pass these filters and conclude that killer acquisitions, while important when they arise, are likely rare. Further analysis suggests that the theory of harm with broader application is that the purchaser would, but for the transaction, enter the same space as the target organically, flipping the traditional “killer” acquisition narrative on its head. We discuss key questions and trade-offs which arise in such transactions and the extent to which they require a change in the standard of proof applied in merger investigations.

By Dr. Oliver Latham, Dr. Isabel Tecu & Dr. Nitika Bagaria¹

I. INTRODUCTION

No issue has received more attention in antitrust circles in recent years than “killer acquisitions.” Arising from a blockbuster academic study identifying 5 to 7 percent of pharmaceutical transactions as having resulted in the “killing” of a new drug under development,² attention has extended to other industries with particular focus on acquisitions in the technology sector. Calls for changes i