Tech M&A was hot in the first quarter, and more non-tech companies made acquisitions than ever before
- Non-tech companies like Nordstrom and FedEx acquired a record number of tech companies in Q1 2018, according to the PwC Deals report.
- 26% of all US tech acquisitions were made by a non-tech company.
- Industries like defense, autos, and healthcare were the big acquirers, and mostly bought IT and software companies.
- Many of the acquirers are looking for teams who can help transform their existing product models.
You may not think of Nordstrom and FedEx as big acquirers in tech, but in the first quarter of the year, both companies earned the accolade.
Through the purchase of two digital retail startups and a digital logistics company, respectively, Nordstrom and FedEx became part of a growing trend of non-tech companies acquiring tech startups to fuel innovation and digital transformation in their existing businesses.
In the first quarter, 26% - or 132 - of US tech deals involved a buyer from outside of the tech industry, according to the PwC Deals report, published Thursday.
Most buyers came from industries like defense, cars, healthcare and pharmaceuticals, and they mainly acquired IT and software companies.
And they weren't stingy, either. Non-tech acquisitions accounted for $21.1 billion out of a total of $60 billion in deals, according to the report.
In-house tech can help companies compete with giants like Amazon
Many of these companies look to tech to help them compete tech-native retailers like Amazon, while others may see acquiring an engineering team as a chance to build proprietary software that can't be found on the market, according to Marc Suidan, who leads US tech deals coverage for PwC."This seems to be a common thread popping everywhere: don't wait to be disrupted but go on the offensive to disrupt," Suidan told Business Insider.
Different companies acquire for different reasons, but Suidan found a few common threads.
Agribusinesses like Monsanto, for example, are interested using IoT to give farmers more control over their crops.
Suidan said that agribusinesses aren't likely to acquire IoT hardware companies, whose products they can buy on the market like any other customer. Instead, they are interested in buying IoT software companies so that they can personalize software to meets their specific needs and give them a leg up on the competition, which can't access the same tools.
Car companies have also show a lot of interest in tech M&A as they look to develop autonomous vehicle software, he said.
While it's clear that outside industries want to take technology in house, it's not clear that the sentiment goes both ways.
Suidan cautioned that companies can sometimes experience a culture clash when they try to make Silicon Valley-trained teams fit into old school corporate models, which often come with fewer freedoms and less interesting employee benefits than are found in the startup world.
Employees will leave if they don't feel like their job is as fulfilling post-acquisition.
"If you can't foster all of that, then you're paying a big premium for something you're going to destroy," he said.