Current scrutiny of anti-competitive business tactics by Amazon.com Inc. US regulators and the European Commission have put its impending takeover of Roomba maker iRobot at risk, but there are hopes for a return to mergers and acquisitions in the technology space this year nonetheless.
This week, Amazon AMZN,
It missed a deadline to make concessions to the European Union that would allay any concerns regulators have about its upcoming takeover of iRobot Corp. IRBT worth $1.4 billion.
IRobot makes the popular Roomba robot vacuum, which sells for about $225 on Amazon.
In September, the US Federal Trade Commission filed a wide-ranging lawsuit against Amazon, alleging that the company is a monopoly and harms consumers by favoring its own products over those offered by third-party sellers on its giant e-commerce site. It did not mention the iRobot deal in its 172-page complaint, but noted Amazon's expansion through acquisitions.
After opening an investigation into the deal in July, the European Commission said in late November that it wanted assurances that Amazon would not harm competition while displaying iRobot's Roomba and other products on its website by engaging in “strategies of sequestration.” Mortgage. The deal has been approved by UK regulators.
“I think the biggest issue is the antitrust lawsuit that the FTC filed in September, along with 17 state attorneys general,” said Ben Rose, president and founder of Battle Road Research in Lexington, Massachusetts. -Party relations. …So this aspect is clearly in the crosshairs of what iRobot is, and what it can bring to Amazon and its smart home products.
Some analysts believe that instead of spending the reduced amount of $1.4 billion, down from $1.7 billion as previously negotiated, Amazon may allow the deal to expire. The companies agreed to a lower price in July.
“It's a lot of speculation, but it's possible they're ready to pull out,” said Dan Newman, president of Futurum Research. “Amazon doesn't have a robotic vacuum product, but they could build a robot with telemetry. Amazon may eventually think there might be another way to capture this market.”
iRobot shares jumped 4.4% on Thursday, ending a five-day selling wave that sent the stock down 19%. Shares are down 35% in the past 12 months.
The robotic vacuum market that iRobot once pioneered is now crowded with at least a dozen competitors, one of the main reasons the company's sales have declined in the past few quarters, said Battle Road Research's Rose. He believes Amazon was more interested in iRobot's navigation and mapping capabilities to create a map of a consumer's home, if the customer gave permission — data that would blend with its smart home vision.
“Amazon's interest is in this intelligent navigation/mapping that can be used in a variety of areas, rather than saying we're going to buy a house cleaning robot that dominates the market,” Rose said. Amazon has a home security and surveillance robot with mapping capabilities called Astro, which is now available by invitation only for $1,600, but it doesn't map as many homes as the Roomba.
But even if Amazon's deal to buy iRobot eventually falls apart, it's not necessarily a sign of another terrible year for tech M&A deals. Ted Smith, president and co-founder of Union Square Advisors in New York, said 2023 saw a 50% decline in deal values, to about $264 billion. Regulatory scrutiny may now be focusing on Big Tech, but he said other companies are starting to look for deals.
“For the big companies — the big tech companies, the great 7 companies — it's going to be difficult to do deals of significant size,” Smith said. However, “there are a lot of buyers who are returning to M&A in a meaningful way.”
News this week that Hewlett-Packard Enterprise HPE,
Agreed to acquire Juniper Networks JNPR,
The $14 billion figure may be a sign of similar deals to come. The conviction among many that the Fed will begin easing interest rates later this year could also contribute to improved deal flow, as could the need for private equity to provide returns for its investors.
“All of these factors will encourage traditional acquirers to get back into the game,” Smith said, adding that companies like Adobe Inc. ADBE,
Salesforce.com Inc. customer relationship management,
IBM, IBM,
To name a few, it will likely come back to mergers and acquisitions.
IRobot may face the future alone, but Rose isn't worried about the company, which currently has no coverage on Wall Street due to its pending Amazon deal. They have been through difficult times before in their history. “They know how to run a tight ship, when there's a need to run a tight ship,” he said.
