Sunday, 28 May 2023

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Facebook-Giphy sale shows how fear of regulators is slowing M&A market

Facebook-Giphy sale shows how fear of regulators is slowing M&A market

The logos of Facebook and Giphy.

Aytac Unal | Anadolu Agency via Getty Images

In 2020, a top Meta executive explained that the company spent $315 million acquiring Giphy “because it’s a great service that needed a home.” Instagram chief Adam Mosseri touted Giphy’s “amazing team” and “expressive” userbase, and stressed that Giphy’s user data was “not the motivation.”

Earlier this week, Meta sold Giphy to Shutterstock for $53 million, an eye-watering 83% markdown. The sale was forced by the U.K.’s antitrust regulator, which ruled that Meta’s acquisition posed a risk to the social media and advertising markets.

It’s a paltry sum of money for most tech companies, but the possibility of regulators refusing to approve deals or unwinding them after they’ve happened has helped chill an already frigid dealmaking environment, experts told CNBC.

“You’re seeing deals get done for 20, 30 cents on the dollar compared to what they would have been even six or twelve months ago,” America’s Frontier Fund advisor and former FDIC chief innovation officer Sultan Meghji told CNBC.

Regulators in Europe and the United States have been eyeing mammoth deals, like Microsoft‘s $69 billion proposed acquisition of Activision, and smaller ones, like Amazon’s $1.7 billion acquisition of vacuum-maker iRobot.

Jonathan Kanter, who helms the Department of Justice’s Antitrust Unit, and Lina Khan, the Federal Trade Commission’s chair, have been given wide latitude by President Joe Biden to pursue potentially anticompetitive behavior. The federal government has brought cases or opened probes into Amazon, Google, Jetblue Airlines, Meta, and Microsoft.

Prior to his DOJ posting, Kanter worked in private practice, advising directors and executives on potential deals and attendant regulatory pitfalls. Khan made her name with a widely-cited journal article on Amazon’s anticompetitive effects.

The Biden administration “has increased scrutiny the scrutiny of deals and enhanced enforcement,” Morrison Foerster global risk and crisis management co-chair Brandon L. Van Grack told CNBC.

Van Grack, the former chief of the DOJ’s Foreign Agent Registration Act unit, noted that regulatory scrutiny was increasing for years prior to the current administration.

Still, top advisors say that boardrooms are now giving regulatory concerns increased weight. High-profile actions have played a part in that, as has the increasing complexity and number of regulatory regimes.

From the FTC’s perspective, the heightened thinking is…

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