The merger and acquisition (M&A) landscape for Big Tech is undergoing a dramatic shift with increased regulatory scrutiny, particularly around antitrust concerns, making large acquisitions a challenge, says GlobalData.

This trend extends beyond traditional M&A to Big Tech’s investments in AI with regulators casting a watchful eye on deals involving smaller AI players. Navigating this complex environment will demand strategic foresight and a willingness to address potential regulatory hurdles.

GlobalData’s latest thematic report – “Tech M&A Regulation” – says that aspiring acquirers need to pre-emptively address concerns from regulators and be ready to make concessions.

At the end of 2023, Adobe abandoned its planned $20-billion acquisition of Figma following opposition from the UK and EU regulators. In January 2024, Amazon’s proposed $1,7-billion acquisition of iRobot collapsed in the face of EU scrutiny. Microsoft closed its multi-billion dollar deal for Activision Blizzard in October 2023, but the UK, EU and the US regulators are investigating its $13-billion investment in OpenAI, the company behind ChatGPT.

The report highlights the regulatory landscape’s impact on Big Tech over the next year. Salesforce faces the lowest regulatory risk, while Meta faces the highest. Antitrust weighting has increased to 20%, reflecting regulators’ focus on curbing Big Tech’s market dominance through M&A scrutiny.

Laura Petrone, principal thematic intelligence analyst at GlobalData, comments: “Merger control legislation is undergoing significant transformation with regulators worldwide adopting a tougher stance on M&A enforcement. As a result, higher fines and compliance costs are on the horizon for Big Tech companies.”

According to the EU’s Digital Markets Act (DMA), a digital gatekeeper can never be sure of whether or not its M&A activity will be reviewed by the European Commission – even if the acquired company is tiny. In the US, antitrust regulators are considering lowering the thresholds at which they will deem companies to have significant market power.

The UK, India and China are also considering more stringent obligations for large digital platforms’ M&A plans. These efforts will make it more difficult for Big Tech to get regulatory approval for further M&A activity.

“Regulators will also increasingly target Big Tech’s artificial intelligence (AI) investments,” says Petrone. “M&A deals and investments in smaller AI companies will be on their radar. Tech companies planning to pump large sums of money into AI start-ups will watch these developments closely.”

Merger control legislation is changing with EU, US and UK regulators tabling legislative proposals to adapt merger control to digital markets and adopting a tougher stance on merger enforcement.

“All these efforts will add to the complexity of the merger clearance environment as getting a deal cleared will become increasingly difficult,” Petrone says.