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Where Is The Talent In M&A Going?

With tech companies shunning Wall Street, what happens to the talent?

17Sep

The baby-faced tech billionaires of Silicon Valley are infamous for shunning the old ways of doing business, ripping apart the rule book and sticking two fingers up at the entrenched corporate establishments. They espouse a certain ideology, that they are working towards a better world for everyone, and they are vocal about the positive impact that they believe technology and the Internet can have on the world.

Nowhere represents the antithesis of these methods and this image to them more than Wall Street, with its hundred year old institutions and perceived culture of greed. For M&A, this has had a huge impact. The money in tech is huge, and companies like Google are purchasing companies for dramatic - often seemingly foolhardy - sums, particularly those in the fields of robotics and machine learning. Between September 2013 and September 2014, M&A investment advisory firm Penna & Company revealed that Google made 36 acquisitions, Yahoo 24, Apple 15, Facebook nine, Microsoft eight and Twitter seven. However, they are increasingly making these without the help of investment banks, relying instead on their own finance and accounting functions, which have come to play a more critical and more specialized role in mergers and acquisitions.

When Apple purchased Beats Electronics for $3 billion, for example, it did not hire an investment bank to advise it. Nor did Facebook when it bought virtual reality company Oculus VR for $2.3 billion. Oracle is particularly notorious for its disdain of Wall Street, and when it acquired Micros Systems for $5 billion they did so with no help for finance firms.

Over the past five years, high technology companies have introduced much greater discipline for all aspects of the acquisition process. Rather that relying purely on resources from the broader pool of individuals on the corporate finance staff for help with acquisitions, companies are setting up teams of finance specialists who are either entirely, or at least substantially, dedicated to M&A work.

This is having an impact on the calibre of employees that Wall Street firms are attracting. Silicon Valley companies have a reputation for being especially strong on employee treatment, which is a direct contract to Wall Street’s reputation for working their staff till their fingers bleed, with the hours so long that they may have even caused deaths. For many as well, tech is now where the money is, and for hungry young graduates looking to work in M&A, it makes sense to follow it.

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