Tech Giants Have Plenty of Money for M&A

There’s likely going to be more M&A in the lower middle market rather than giant deals this year, Bell said. The capital markets and interest rates, and cost of capital generally are going to limit the ability for some of the larger strategic buyers to make a play.

That doesn’t include Amazon, Google, Microsoft and IBM. “Groups like that have plenty of cash available,” he said.

“Honestly, a $1 billion acquisition [barely] hits their cash balance,” Bell said. “So they are making huge plays. I’d say Google and Microsoft more than any other in the space. And I don’t expect anything to change there. This is a time when groups like that have a huge competitive advantage because they didn’t want to pay or overpay for companies in prior years, and in some cases they did. But they now are in a situation where a lot of private equity firms are going to be looking to kind of exit from some of the investments they made over the last three to five years, and put more capital to work in new projects and new companies.”