Current heightened scrutiny by U.S. and European Commission regulators over anti-competitive business strategies by Amazon.com has put the company’s pending acquisition of Roomba maker iRobot in jeopardy, but it still won’t sell this year. It is expected that M&A of high-tech companies will revive.
Amazon this week
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It missed a deadline to submit concessions to the EU to allay regulators’ concerns about its pending $1.4 billion acquisition of iRobot.
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iRobot makes the popular Roomba robot vacuum, which sells for about $225 on Amazon.
In September, the Federal Trade Commission issued a major ruling against Amazon, accusing it of being a monopoly and harming consumers by prioritizing its own products over third-party sellers on the giant e-commerce site. filed a large-scale lawsuit. The 172-page complaint does not mention the iRobot deal, but it does mention Amazon’s expansion through the acquisition.
After launching an investigation into the deal in July, the EC said in late November that Amazon would not harm competition by engaging in a “seizure strategy” in offering iRobot’s Roomba and other products on its website. He said he was seeking guarantees. The transaction has been approved by UK regulators.
“I think the bigger issue is the FTC antitrust lawsuit filed in September with 17 state attorneys general,” said Ben Rhodes, president and founder of Battle Road Research in Lexington, Massachusetts. Stated. “This lawsuit is a public commentary on Amazon’s third company.” – Party Relations. …So that aspect obviously applies to what iRobot is and what it brings to Amazon and its smart home products. ”
Some analysts believe Amazon may simply let the deal expire instead of spending $1.4 billion, down from the previously negotiated $1.7 billion. The two companies agreed to lower prices in July.
Dan Newman, president of Futurum Research, said, “There’s a lot of speculation, but they may be willing to walk away.” “Amazon doesn’t have a robot vacuum product, but it is possible to build robots with telemetry capabilities. Amazon may eventually think there may be another way to capture this market.” do not have.”
iRobot stock rose 4.4% on Thursday, ending a five-day decline of 19%. The stock price has fallen 35% in the past 12 months.
Battle Road Research’s Rose said the robot vacuum market pioneered by iRobot is now crowded with at least a dozen competitors, a key reason for the company’s declining sales over the past few quarters. He said it was one. He believes Amazon was more interested in iRobot’s navigation and mapping capabilities, which can map a consumer’s home with the customer’s permission, data that blends with the company’s smart home vision.
“Amazon’s interest is not in ‘buying the home cleaning robot that dominates the market,’ but in this smart navigation/mapping that can be used in a variety of areas,” Rose said. Amazon has a home security and surveillance robot with mapping capabilities called Astro, currently available by invitation for $1,600, but it doesn’t map as many homes as Roomba.
But even if the Amazon-iRobot deal ultimately falls apart, it doesn’t necessarily signal another bad year for tech M&A deals. Ted Smith, president and co-founder of Union Square Advisors in New York, said deal value will plummet by 50% in 2023, to about $264 billion. While regulatory scrutiny may be focused on Big Tech right now, other companies are also starting to explore deals, he said.
“It’s going to be difficult for the biggest companies like Big Tech and the Magnificent Seven to do deals of meaningful size,” Smith said. But “there are a lot of buyers who are coming back to M&A in a meaningful way.”
This week’s news is Hewlett-Packard Enterprise
HPE
Agreed to acquire Juniper Networks
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The $14 billion deal could be a sign of similar deals to come. The belief by many that the Fed will start lowering rates before the end of the year could also help improve deal flow, as could the need for private equity to benefit investors.
“All of these things are encouraging for traditional acquirers to get back in the game,” Smith said, adding that companies like Adobe could jump in.
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salesforce.com, Inc.
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and IBM
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I’d probably go back to M&A, to name a few.
While iRobot may face a future alone, Rose isn’t worried about the company, which is currently not receiving Wall Street coverage due to its pending deal with Amazon. “They’ve been through tough times before in their history. They know how to run a tight ship when they need to run a tight ship,” he said. said.
