Regulators have hindered tech M&A, but dealmakers are doubtful that the election will bring significant change.

• In 2021, tech transaction volume reached a high of $1.5 trillion, but it has since decreased to $465 billion in 2024, according to Dealogic.
• The regulatory environment in the U.S. and Europe has posed a challenge to companies in addition to the macro challenges that hit in 2022.
• The two parties' conflicting views at the top levels make the upcoming presidential election unclear.

Earlier this year, the company had been in talks to acquire a marketing software maker, but no deal took place. The company then attempted to acquire a cybersecurity startup, Wiz, but that didn't happen either.

Google opted for a unique approach in its recent acquisition of Character.AI, the founders of a generative AI startup. Instead of purchasing the company and shutting it down, Google chose to keep the startup alive and entered into a licensing agreement for its technology. This strategy is similar to that of other companies such as and.

The Biden administration and Federal Trade Commission head Lina Khan have prevented big tech companies from making large acquisitions. In certain instances, they have also abandoned smaller deals. For example, Amazon abandoned its $1.7 billion purchase of iRobot in January after regulators raised concerns.

In 2021, tech transaction volume reached a high of $1.5 trillion, but it has since decreased to $465 billion in 2024, according to Dealogic.

Private equity buyers are keeping the tech market afloat, as evidenced by recent acquisitions. In July, Blackstone agreed to buy data provider Preqin for $3.2 billion, while Permira announced it was buying website-building platform Squarespace in a deal valued at almost $7 billion. Thoma Bravo, a leading tech buyout firm, also sold Instructure to KKR for $4.8 billion in July.

The upcoming presidential election in November could result in a regulatory shake-up, possibly removing obstacles to deal-making.

Sen. JD Vance, Donald Trump's running mate, has praised Khan's stricter rules on mergers and has stated that there should be an antitrust solution to some of the behaviors of large tech platforms.

Reid Hoffman and Barry Diller, billionaire donors on the Democratic side, have expressed concerns about Khan maintaining her job if Vice President Kamala Harris is elected.

Andrew Luh, a partner at Gunderson Dettmer, believes that if Trump wins, the regulatory environment will still be challenging, which will limit big deals.

The Biden administration's efforts to regulate Big Tech have extended far beyond blocking mergers and acquisitions.

The Justice Department has filed a second antitrust trial against Alphabet, accusing the company of monopolizing search and advertising. The DOJ sued on antitrust grounds in March. Additionally, the Federal Trade Commission has pending cases against both Alphabet and Amazon.

The European environment is similarly rigid, and no deal is safe. In December, Facebook walked away from its $20 billion agreement to purchase design software startup Figma and paid a $1 billion breakup fee. The companies stated in a statement that there is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.

Figma, a design software startup, was valued at $12.5 billion in July. However, with a declining M&A market and a prolonged drought of initial public offerings, Figma may not be considered a strong IPO candidate until the market reopens. The economic slowdown starting in 2022 has caused drastically reduced valuations, making it challenging for companies to go public.

A Figma spokesperson declined to comment on the company's plans.

Earlier this month, Dana Rao, who was Adobe's general counsel at the time, announced his departure after 12 years at the company. In a December interview, Rao stated that Adobe leadership believed they were justified in pursuing Figma following the failure of their competing product design program. However, regulators had a different perspective.

The regulators have been highly focused on the newer antitrust doctrines that emphasize the importance of future competition in their analysis, as we have had a significant amount of interaction with them, he stated.

The Antitrust Division's head, Jonathan Kanter, stated that Adobe's decision to back down ensures that the competition between the two companies will continue to benefit designers, creators, and consumers.

'Very, very disciplined'

There are still deals taking place, outside the watchful eye of regulators.

In January, it was agreed to acquire the networking hardware company for $14 billion, and this month, it was announced that the startup Own would be bought for $1.9 billion.

The 2022 downturn caused management to prioritize shareholder response over regulatory concerns, as they became increasingly fixated on profitability.

Juniper will contribute to HPE's non-GAAP earnings in the first year, as stated by HPE CEO Antonio Neri in a conversation with CNBC.

"Neri stated in an interview that we have been extremely disciplined in returning invested capital, ensuring that every dollar spent generates value for our shareholders. As a result, we made a commitment to a series of synergies with Juniper that more than compensated for the cost of capital, making the acquisition worthwhile."

In January, Neri informed analysts that the two companies operate in some of the same markets but in different sectors, and he did not expect prolonged conflicts with regulators. The U.K.'s Competition and Markets Authority approved the merger in August.

Letelier, HPE's head of corporate development, stated that when advising Neri on a potential deal, his team and he always consider how regulators might view it. Although some transactions are taking longer to close than before, the fundamentals of what constitutes a problematic deal versus a non-problematic one have not changed, according to Letelier.

Marc Benioff, CEO of Salesforce, stated that Own should improve free cash flow in the second year following the acquisition's completion. This is Benioff's first billion-dollar-plus acquisition since 2021, when Salesforce purchased Slack for $27 billion, its largest acquisition to date. The DOJ's Antitrust Division requested additional information on that deal before granting clearance.

In an interview last week, Benioff criticized U.S. regulators for being "somewhat dysfunctional" but praised Europe for taking action against antitrust violations. He highlighted a recent European Commission finding that Microsoft had violated antitrust rules by bundling Teams, its Slack competitor, with its Office productivity applications.

"Benioff stated that the EU and U.K. are the ones who are truly functional and working seriously, according to him. He believes that it is a significant story to follow the Europeans in this regulatory environment."

After the Slack acquisition, Salesforce has been concentrating on smaller transactions, especially after facing pressure from activist investors to prioritize profitability. Recently, Salesforce acquired AI talent from Airkit and a Sales Cloud software add-on from Spiff.

Benioff stated that Salesforce has completed over 60 acquisitions. Although the company has experienced failures in M&A, it has also achieved success in several of its transactions, particularly the larger ones. Prior to Slack, Salesforce acquired Tableau Software and MuleSoft.

Hard to be confident

When assessing a potential deal, one of the initial questions executives ask is the likelihood of it closing, according to Derek Idemoto, the head of corporate development at the networking hardware company.

Idemoto, who has worked on over 100 deals in nearly 17 years at the company, posed the question: "What level of risk are you comfortable taking on the regulatory side, given the current challenges and the potential for litigation?"

Cisco has become more selective due to Idemoto's view that the risk of purchasing Splunk was worth taking. Before the $27 billion acquisition of Splunk in September, Idemoto saw the company as comfortably outside Cisco's core of networking equipment.

"Certainly it's an offensive play for us," Idemoto said.

Despite being six months ahead of schedule, the deal successfully passed through and was closed in March.

"Confidence is key when signing something, Cisco style," Idemoto emphasized.

The FTC and DOJ are closely monitoring the megacap companies, making it challenging for them to maintain that level of confidence in their big deals. Alphabet's last major acquisition was its $5.4 billion purchase of Mandiant in 2022. Microsoft's massive $75 billion acquisition of Activision took 20 months and involved a protracted fight with U.S. and European regulators. Amazon hasn't had a billion-dollar-plus deal since its $3.9 billion acquisition of One Medical in early 2023.

Amazon recently announced that it had hired a quarter of staffers from Covariant, a company that develops AI models for robots. This was the company's second AI acquihire deal, following a similar agreement with Adept in June. The deal with Adept also attracted an informal FTC inquiry.

Acquisitions are still part of Amazon's growth strategy, as the company stated, and are a critical and healthy part of an innovation economy. Microsoft and Google also declined to comment on this story.

Any tech company considering its acquisition strategy will face challenges in forecasting the future due to the uncertainty of Vice President Harris' potential changes if she wins in November or Trump's potential actions if he returns to the White House.

President Trump blocked some deals on national security grounds, while President Biden's regulators have filed a record number of merger enforcement actions, according to Bloomberg.

Letelier stated, "We are at a crossroads, and we are uncertain which side of the fork the policy will take."

Big Tech is quietly acquiring AI startups through methods other than purchasing the companies.