Microsoft takes advantage of antitrust spotlight on rivals to go hunting for large acquisitions

Twenty years in the past, the United States government filed suit against Microsoft for abusing its market energy. Today, Microsoft is empire constructing as a result of the nation’s regulatory focus is on its largest rivals.

Microsoft announced Monday it had acquired Nuance Communications for $16 billion ($19.7 billion together with web debt). The deal provides Microsoft an organization that focuses on voice transcription and associated synthetic intelligence software program. Nuance has a specific area of interest in well being care, offering software program to digitize conversations from physician’s visits and facilitate scientific documentation.

The acquisition comes a few month after Microsoft closed its $7.6 billion deal for ZeniMax, the mother or father firm of online game writer Bethesda. That transaction is supposed to enhance Microsoft’s Xbox towards rising video gaming competitors. Microsoft has also been in talks to acquire Discord, a voice, textual content and video-chatting platform for video games, for greater than $10 billion. Those discussions have occurred concurrently to the Nuance transaction discussions, which began in December, in accordance to an individual accustomed to the matter.

Microsoft’s latest deal talks do not cease there. The firm nearly acquired TikTok’s U.S., Canadian, Australian and New Zealand operations last year in a deal that was being mentioned within the $20 billion to $30 billion vary. Microsoft has additionally recently approached Pinterest to gauge their curiosity in promoting, in accordance to a Financial Times report in February. Pinterest has a market capitalization of greater than $51 billion.

Less than three years in the past, Microsoft paid $7.5 billion for GitHub. Less than 5 years in the past, Microsoft paid more than $26 billion for LinkedIn.

Spending tens of billions on acquisitions is starkly totally different from the methods of the world’s different expertise tremendous giants — Apple, Amazon, Google and Facebook. It additionally simply so occurs that Congressional Democrats and authorities businesses together with the DoJ and FTC have taken a close look at whether Apple, Amazon, Google and Facebook have abused their market energy, and are contemplating separating their companies or unraveling earlier large acquisitions.

Other than Microsoft, Amazon is the one member of the large 5 that has spent greater than $5 billion on an acquisition within the final 5 years, shopping for grocery meals chain Whole Foods for greater than $13 billion in 2017.

Nuance is Microsoft’s fourth such takeover.

Apple, Amazon, Google and Facebook, properly conscious they’re underneath regulatory fireplace, are all continuing cautiously with bigger acquisitions, in accordance to folks accustomed to the matter. A serious buy for any of them would nearly actually draw political consideration, particularly as their market capitalizations have ballooned through the pandemic. It’s attainable an enormous M&A transaction would turn into the catalyst for extra draconian actions, resembling an organization breakup or pressured divestitures.

But Microsoft has prevented the identical degree of scrutiny. That eliminates bidding wars and makes Microsoft the present purchaser of alternative — a task it doubtless would not have performed 5 years in the past.

This dynamic popped up throughout final 12 months’s TikTok discussions, when Google felt it couldn’t lead a deal for the U.S. assets as a result of of its regulatory positioning.

CEO Satya Nadella alluded to why he thinks the federal government has handled Microsoft — an organization with a $1.9 trillion market valuation — in another way in an interview with CNBC.

“Our job is to provide technology so that [doctors and providers] can keep all of the data secure,” Nadella said, talking particularly about Nuance.

“This is not about some aggregation play. This is about pure platform providers. That makes Microsoft very distinct in how we approach most of what we do.”

In different phrases, Nadella is making the argument that Microsoft is agnostically offering expertise whereas rivals are utilizing client information in doubtlessly dangerous or monopolistic methods.

Microsoft shareholders will in the end have to resolve how a lot empire constructing they’re comfy with. Nadella has turned the corporate round together with his focus on enterprise expertise. Nuance suits the main target. Other targets are additional afield. But, as Wedbush analyst Dan Ives wrote in a observe to purchasers, “clearly, Redmond is on the ‘offensive’ around M&A with the company in a clear position of strength.”

So far, shareholders usually are not exhibiting any trepidation concerning the Nuance deal, sending Microsoft shares up about 0.5% in afternoon buying and selling Monday.

WATCH: Microsoft, Nuance CEOs on $16 billion deal, cloud strategy, health-care AI solutions