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Lina Khan, chair of the U.S. Federal Trade Commission, and Jonathan Kanter, assistant attorney general for the Justice Department’s antitrust division, participate in a discussion on antitrust reforms at the Brookings Institution in Washington on Oct. 4, 2023. Khan assumed the role of FTC chair in June 2021 after being appointed by U.S. President Joe Biden and confirmed by the Senate.

Drew Angerer | Getty Images

Google had been in talks to acquire marketing software maker HubSpot earlier this year, but no deal took place. The company then made a run at cybersecurity startup Wiz. But that didn’t happen either.

Google took a different tactic in closing its one notable transaction of late. Following a model pursued by Amazon and Microsoft to lure experts in artificial intelligence, Google announced last month it was hiring the founders of generative AI startup Character.AI. Rather than buying Character outright and shutting it down — the standard acquihire playbook — Google kept the startup alive and entered into a licensing deal for its technology.

This is the new world of tech M&A. Under the Biden administration, and more specifically Federal Trade Commission head Lina Khan, the biggest companies have been thwarted from pursuing large deals. In some cases, they’ve even walked away from smaller deals. Amazon abandoned its $1.7 billion purchase of iRobot in January after the FTC and European regulators raised concerns.

Since peaking at $1.5 trillion in 2021, tech transaction volume has plummeted, dropping to $544 billion last year, according to Dealogic. So far in 2024, that number sits at $465 billion.

Within tech, private equity buyers are the ones keeping the market afloat. In July, BlackRock agreed to buy data provider Preqin for $3.2 billion, two months after Permira announced it was buying website-building platform Squarespace in a deal valued at almost $7 billion. Thoma Bravo, a leading tech buyout firm, said in July it was selling Instructure to KKR for $4.8 billion.

Don’t expect much to change for the rest of this year. With the presidential election coming in November, the regulatory environment could be poised for a shake-up, potentially leading to the removal of deal-making barriers.

However, neither party offers much clarity for what the future would bring. Sen. JD Vance, Donald Trump’s running mate on the Republican ticket, has praised Khan’s stricter rules on mergers, and he told CNBC last week that “there should be an antitrust solution” to some of the behaviors of large tech platforms.

Apple isn't an evil company, but they do sometimes benefit from Chinese slave labor: JD Vance

On the Democratic side, billionaire donors Barry Diller and Reid Hoffman have voiced concerns about Khan keeping her job if Vice President Kamala Harris wins.

“If Trump wins, I think that the regulatory environment will still be fairly challenging, and under a challenging regulatory environment, that just limits big deals,” said Andrew Luh, a partner at law firm Gunderson Dettmer who represents startups in mergers and acquisitions.

The Biden administration’s crackdown on Big Tech has gone well beyond squashing M&A.

Alphabet is in the midst of its second antitrust trial, following charges from the Justice Department that the company acted as a monopoly in search and advertising. The DOJ sued Apple on antitrust grounds in March. The FTC has cases pending against Meta and Amazon.

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

In July, Figma said it had completed a tender offer valuing the design software startup at $12.5 billion. Figma is viewed as a strong IPO candidate when that market eventually reopens. But alongside a plummeting M&A market, initial public offerings are also in an extended drought as companies continue to adapt to drastically reduced valuations wrought by the economic slowdown starting in 2022.

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

Dana Rao, who at the time was Adobe’s general counsel, announced his departure earlier this month after 12 years at the company. Rao said in a December interview that Adobe leadership felt justified in pursuing Figma after the failure of its competing product design program. But regulators were taking a different view.

“We’ve had a lot of interaction with the regulators, and they’ve been very focused on the newer doctrines of antitrust law that say that future competition is a critical part of the antitrust analysis,” he said.

Jonathan Kanter, head of the Justice Department’s Antitrust Division, said in a statement after Adobe backed down that the move “ensures that designers, creators, and consumers continue to get the benefit of the rivalry between the two companies going forward.”

‘Very, very disciplined’

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

Hewlett Packard Enterprise agreed in January to acquire networking hardware company Juniper for $14 billion. And this month, Salesforce said it was buying startup Own for $1.9 billion.

In those cases, management was less concerned about regulators and much more focused on how shareholders would respond due to the growing obsession with profitability, following the 2022 downturn.

US company Hewlett Packard Enterprise President and Chief Officer Executive Antonio Neri gives a conference at the Mobile World Congress (MWC), the telecom industry’s biggest annual gathering, in Barcelona on February 27, 2024.

Pau Barrena | AFP | Getty Images

HPE CEO Antonio Neri told CNBC that Juniper would add to non-GAAP earnings in year one.

“We have been very, very disciplined on returning invested capital, meaning every dollar spent has to deliver value to our shareholders,” Neri said in an interview. “And that’s why, in the case of Juniper, for example, we committed to a series of synergies that then more than pay for the cost of capital to make this acquisition.”

Neri told analysts in January that the two companies do business in some of the same markets, but in different verticals, and said that he didn’t anticipate protracted battles with regulators. In August, the U.K.’s Competition and Markets Authority approved the tie-up.

Sergio Letelier, HPE’s head of corporate development, said that when he and his team members advise Neri on a potential deal, they always discuss how regulators might treat it. While some transactions are taking longer to close than they would have previously, “the fundamentals of what is a problematic deal vs. what is not a problematic deal hasn’t changed,” Letelier said.

At Salesforce, CEO Marc Benioff said that Own should bolster free cash flow in the second year after the deal closed. It’s Benioff’s first billion-dollar-plus acquisition since 2021, when the cloud software vendor paid $27 billion for Slack, its largest purchase ever. The DOJ’s Antitrust Division asked for additional information on that deal before clearing it.

In an interview last week, Benioff called U.S. regulators “somewhat dysfunctional” but applauded Europe for recognizing where competition really is being harmed. He specifically pointed to a recent finding by the European Commission, the executive body of the European Union, that Microsoft had breached antitrust rules by tying Teams, its Slack competitor, to its core Office productivity applications.

“They’re the ones who are actually functional and who are doing serious work,” Benioff said, referring to the EU and U.K. “I think that it’s a big story that we’re following the Europeans in this regulatory environment.”

Since the Slack purchase, Salesforce has pursued only smaller deals, particularly after facing off with activist investors who pressured the company to put a renewed focus on profitability. Salesforce landed AI talent from buying Airkit and a Sales Cloud software add-on from Spiff.

“We’ve done more than 60 acquisitions,” Benioff said. “We’ve tried and failed a lot in M&A, but we have also succeeded in quite a few of them, especially the big ones.” Before Slack, Salesforce acquired Tableau Software and MuleSoft.

Hard to be confident

At Cisco, one of the first questions executives ask when evaluating a potential deal is how certain they are it will close, said Derek Idemoto, the networking hardware company’s head of corporate development.

“The question is, How much risk are you willing to take on the regulatory side, given how hard things are at this time and how litigious things could be,” said Idemoto, who’s worked on more than 100 deals in his nearly 17 years at the company.

Idemoto said that’s made Cisco more selective these days. Before the company announced its $27 billion purchase of data analytics software company Splunk last September, he said he viewed the risk as absolutely worth taking. Splunk sat comfortably outside Cisco’s core of networking equipment.

“Certainly it’s an offensive play for us,” Idemoto said.

The deal sailed through, even closing in March, six months ahead of schedule.

“Having a high confidence level when you sign something — that’s the Cisco way,” Idemoto said.

That level of confidence would be difficult for the megacap companies as long as the FTC and DOJ are aggressively watching them. Alphabet’s last big deal was its $5.4 billion purchase of cybersecurity company Mandiant in 2022. Microsoft closed its massive $75 billion purchase of Activision in October, but it took 20 months and a protracted fight with U.S. and European regulators. Amazon hasn’t had a billion-dollar-plus deal since closing the $3.9 billion acquisition of One Medical in early 2023.

Last month, Amazon announced it was hiring a quarter of staffers from Covariant, which builds AI models for robots. It was the company’s second AI deal in the acquihire vein, following a similar agreement with Adept in June. Even that deal attracted an informal FTC inquiry.

Amazon didn’t provide a specific comment for this story, but said acquisitions are still part of its growth strategy and “are a critical and healthy part of an innovation economy.” Microsoft and Google declined to comment.

HPE’s Letelier said that any tech company considering its acquisition strategy will have a difficult time forecasting for the future because it’s not clear what changes Vice President Harris might make if she wins in November or what Trump would do if he returns to the White House.

Trump as president blocked some deals on national security grounds, following recommendations from the Committee on Foreign Investment in the United States. Regulators under President Joe Biden, meanwhile, have filed a record number of merger enforcement actions, Bloomberg reported.

“We’re at a crossroads here, and we don’t know which side of the fork the policy is going to go,” Letelier said.

WATCH: How Big Tech is quietly acquiring AI startups without actually buying the companies

How Big Tech is quietly acquiring AI startups without actually buying the companies

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

Liquidated damages

Bluesky CEO: Our platform is 'radically different' from anything else in social media

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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