Tech giants and startup acquisitions: Insights from the evolutiuon of acquired products

Alphabet, Amazon, Apple, Meta, and Microsoft (“AAAMM,” formerly GAFAM) have built vast ecosystems of online products and services. Over the past decade, these firms have extensively acquired other companies, primarily young startups. Previous literature has shown that incumbents may have several motivations to acquire new entrants: they may be interested in the product, technology, network of users, or staff of the acquired company, or they may seek to eliminate a potential competitor. In this paper, we rely on a database of 362 acquisitions carried out by AAAMM firms between 2015 and 2023 to provide evidence on the significance of these acquisitions and detailed statistics about the acquired companies. In particular, we find that they (i) acquired very frequently, with an average of 3.4 companies per month in the 2015-2023 period (despite a noticeable slowdown over the years) and (ii) targeted overwhelmingly young companies, with more than half of them being 5 years old or younger. We then examine the evolution of the acquired products to better understand the underlying motivations for these acquisitions, showing that a substantial portion of the acquired products are discontinued and proposing a framework to carry out an initial ex post screening of potentially problematic acquisitions