As opposed to some of the larger tech companies, like Microsoft and Google, Apple doesn’t really go on start-up spending sprees, which might come as a surprise given that it has well over $30 billion in cold hard cash sitting in the bank. On the contrary, Apple has only purchased a grand total of 11 companies since Steve Jobs first returned to Apple, with nearly all of them being surgical acquisitions with an immediate connection to future products from Apple, such as its 2005 acquisition of FingerWorks.
Notably, though, Apple’s appetite for acquisitions has been growing as of late, with 3 deals to their credit in just under a year. Apple of course purchased PA Semi back in 2006, but most recently, they purchased a map software company along with Quattro, a mobile ad company. According to a recent report in Business Week, Apple has now enlisted the help of a Mergers & Acquisition specialist to help it spend some of its voluminous cash to acquire companies with cutting edge technology that Apple can easily fuse with its own vision.
Last year, Apple quietly hired a Goldman Sachs investment banker, Adrian Perica, to help the company cut deals. Multiple sources close to Apple say they believe Perica is the first dedicated M&A specialist on staff. The company has also stepped up its pace of acquisitions: Three of Jobs’ 11 deals have come in the past five months, including the $275 million purchase of Quattro Wireless, the largest buy since Jobs’ return. “Given Apple’s strong stock price, it is in a position to be generous [in doing deals],” says Michael Kwatinetz, a general partner with venture capitalists Azure Capital Partners in the Valley. Apple spokeswoman Katie Cotton declined to comment on the company’s acquisition strategy or whether it has had deal specialists on staff in the past.
Beforehand, Apple’s approach to tech mergers and acquisitions was “ad hoc”, with much of the legwork and administrative details being left in the busy hands of whatever executive happened to spot an attractive target company. The process was disorganized, cumbersome, and worst of all, slow moving. It was this lackadaisical approach that ultimately caused Apple to come in second in the contest to acquire AdMob, a premiere mobile ad company that was eventually swallowed by Google for a cool $750 million.
Sources tell BusinessWeek that Perica will ensure that Apple will not make similar mistakes going forward. They specifically point to Apple’s recent acquisition of LaLa, an innovative music streaming site Apple acquired in early December..
The company moved unusually quickly, closing the deal in a few weeks, rather than the more typical two to three months. It was clear that Apple didn’t want to lose out again, and especially not to Google. “They’ve always gone slow on M&A, but that’s changing,” says one Silicon Valley banker.
As for why Apple is looking to become more nimble in the acquisition game, the answer is quite simple. The tech landscape is changing very quickly, a fact made all the more clear when you consider that Apple’s most profitable product today is the iPhone. 4-5 years ago, Apple manufacturing a phone seemed absolutely ridiculous. But as Apple moves outside its core competencies and expands into new markets with new products, it can’t rely on in-house technology exclusively as it did in the past if it wants to stay competitive (its foray into mobile advertising is a perfect illustration).
Shifts in technology happen quickly and sharply these days, and it therefore makes sense that Apple wants to ensure that it can react accordingly and swiftly when need be.