Undoubtedly, tech companies have become the new darlings of today's corporate world. However, this spotlight on tech giants isn't confined solely to their triumphs but also encompasses the challenges they face.
Regulatory red lights flicker as major acquisitions, like Adobe-Figma and Microsoft-Activision Blizzard, encounter scrutiny and hurdles
Undoubtedly, tech companies have become the new darlings of today's corporate world. However, this spotlight on tech giants isn't confined solely to their triumphs but also encompasses the challenges they face.
As these tech titans embark on new ventures, leveling up their game through mega deals and acquisitions, a red light is being flashed by regulatory authorities. This signal, perhaps, serves as a reminder that even in the vast arena of tech giants, there is a force greater than them, one that demands scrutiny and regulation.
Two recent instances highlight the hurdles tech giants faced in major acquisitions recently. Adobe's $20 billion deal to acquire Figma was halted, citing a lack of a clear path for antitrust approvals in Europe and the UK. Meanwhile, Microsoft had to go over 20 months of regulatory hurdles to successfully complete its massive $69 billion acquisition of Activision Blizzard. Probably, the journey of tech giants could encounter a turbulent path under the scrutiny of regulatory authorities.
But Why Regulatory Watchdogs Are Roaring?
Microsoft's quest to acquire Activision Blizzard resembled a 'Call of Duty' mission, unfolding as a multi-front battle. Regulatory concerns over the console gaming market, potential monopolistic power, and consolidation worries led to a complex and prolonged approval process. The deal faced objections from the U.S. Federal Trade Commission, the European Commission, and the U.K.'s Competition and Markets Authority. All the negotiations and concessions, including agreements with console rivals and cloud-gaming providers, contributed to the extended timeline for the acquisition.
The concern also lies in the regulatory systems itself, which were crafted for the industrial era, struggling to keep pace with the rapid dynamics of the networked economy. This struggle introduces uncertainties for both large technology companies and the startups they aim to integrate or acquire.
The regulatory challenges may not solely come from a sudden 'call of duty' by regulators but rather from inherent complexities within the system. However, it's possible that the primary reason could be entangled within this intricate web.
The recent Adobe-Figma deal was canceled due to unclear paths for antitrust approvals in Europe and the UK, reflecting heightened regulatory scrutiny over big tech acquisitions and their potential impact on market competition and emerging startups, as per a report by Reuters.
To which Adobe CEO Shantanu Narayen had said "strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently."
Reason entangled in a web? Maybe.
A GoodBye to Innovation...?
In the mega deal ballroom, the concerns raised by the UK's Competition and Markets Authority echo prominently in the context of the Adobe-Figma deal. Their worry centers around competition and innovation.
Merging independent entities into a single basket poses the risk of creating a monopolistic picture, potentially throwing hurdles in the path of innovation. There might be a need for caution for balance, ensuring that consolidation leads to healthy competition.
Whatsoever the regulatory watch may demand from these companies, as darlings of the corporate world, tech giants are evidently not engaged in a game of easy plays.