Why It's A Summer of Love for Tech M&A, Marvell + Innovium the latest

Your daily head start in the business of tech + filtered + focused

The most important thing in tech today is …

not just Marvell’s sweet deal to buy Innovium for about $1 billion — it’s the broader trend the pact illuminates. The pandemic has shifted the calculus for tech mergers and acquisitions, and that’s leading some companies to boldly reposition themselves to compete in a recovery.

Let’s reflect for a moment on a couple of other deals this newsletter has highlighted in the past month: There was Square/Afterpay just yesterday:

Fortt Knox: Innovation Curated
Square Wants Afterpay in $29 Billion Bet on Installments
The most important thing in tech today is … Square saying it will purchase buy-now-pay-later company Afterpay for $29 billion in stock, a 30% premium over where Afterpay recently traded. It’s the latest example of a large tech player piling into the installments game…
Read more

and Zoom/Five9 on July 19:

Fortt Knox: Innovation Curated
Zoom's $15 Billion Bet on the Enterprise
The most important thing in tech today is … Zoom’s planned purchase of Five9 for $14.7 billion, clarifying its post-pandemic growth plan. Zoom’s ambitions aren’t about consumers, or even business video. It looks like Zoom wants to be the modern platform for high-stakes business communication, period…
Read more

And now, Marvell/Innovium. In this deal, Marvell gets an innovator in cloud Ethernet switches, and a chance to challenge Broadcom in a market it’s dominated. Marvell’s paying just shy of $1 billion net of cash for a company that’s doing $150 million in annual sales and looks to be signing up a mega-scale cloud customer. That’s about 6.5x revenue.

At first blush, it’s tough to see what these deals have in common. Zoom, which caught on with consumers during the pandemic, is buying an enterprise player. Square, which made waves in crypto and stock trading during lockdown, is buying an e-commerce installments player. Now this.

My take: In the cases of Zoom and Square, they know the trends that accelerated their business (and stock) during the pandemic aren’t sustainable. They’re adding stable, growing businesses that will be.

Innovium probably had to make a different calculation about the post-pandemic world: The chip business is fraught with peril now, with the difficulty getting your product reliably manufactured and delivered. Even for a high-flying startup, that could have meant trouble preparing for an IPO or signing big customers. Why not team up with a scaled industry specialist that would get a real benefit from the combination?

Coming up today on CNBC’s TechCheck, 11 a.m. ET / 8 a.m. PT …

Reese Witherspoon, Hello Sunshine founder; Henry Schuck, Zoominfo CEO; Chris Best, Substack CEO

While you were sleeping …

Google announced Monday it will build its own smartphone processor, called Google Tensor, that will power its new Pixel 6 and Pixel 6 Pro phones this fall. CNBC

Shares of Tencent and NetEase plunged on Tuesday after Chinese state media branded online gaming “opium” and likened it to a drug. The article also called for further restrictions on the industry in order to prevent addiction and other negative impacts on children. The article was deleted a few hours after publication but has since been re-published with a new headline and references to “opium” removed. CNBC

In the broader world …

China’s top state propaganda organs, which decide what people can read and watch in the country, have jointly urged better “culture and art reviews” in China partly by limiting the role of algorithms in content distribution, a policy move that could translate into higher compliance costs for online content providers such as ByteDance and Tencent Holdings. South China Morning Post

On the horizon …

8/5: Chris McNabb, Boomi CEO in a Fortt Knox 1:1

I’m listening to …