The Window for Cheap Money is Closing. Will That Impact M&A?

The Fed is finally starting to indicate that it is going to honor investors with some rate of return. Portfolios everywhere are suffering from the cheap money strategy that has helped spur the economy and at the same time made passive investment a fool’s strategy.

Perhaps we have Apple to credit for issuing bonds that finally gave Treasuries a competitor.

So now that we are heading for more expensive money, is there a last binge of M&A that will take place?

My expectation is that it will happen. We have seen a lot of companies this year expand their portfolio of solutions that point to a convergence. Oracle is increasing the Network I/O capability with Acme and Tekelec. Apple acquired AuthenTec and Particle. Facebook acquired Atlas and Snaptu. Google acquired CleverSense and Clear Intelligence. Microsoft acquired Pando and Yammer. Yahoo acquired Stamped and Summly.

All of these acquisitions look disjointed until you ask what problems they are trying to solve.

Pardon the pun, but the answer is they are all trying to get a better edge.

The change in mobile is manifesting itself in two ways here.

The obvious way to a network planner is the Oracle strategy of improving network I/O and working on the infrastructure.

But on the server side, the higher level approach (sorry for pun again) is to make the services at the edge more efficient. This is happening in two ways; the first is the use of cloud services and the second is the adoption of cloud-like management in the network with the new definition of Software Defined Networks [SDN] – or, put a different way, “network virtualization.”

“If you build it they will come” now has a push-pull effect: the application infrastructure side with the network side.

On the application side, I can see the return to local services increasing because so many of the acquisitions are adding analytics, and applications focus on delivering localized information.

On the network side, the offload strategies are about to change with better services being delivered away from the macro cell.

Integrating these two layers may not be necessary, but one company that may be in a position to bring a converged experience is OpenRAN, where the backhaul is designed to be shared with the edge. Right now , this strategy looks like an easy fit for infrastructure facilitators like American Tower and FiberTower, but I am thinking that if ever the app companies wanted to further invest in the network, which is usually capital intensive, now is the time with money being cheap.

It’s entirely possible that further M&A activity will blend the two worlds. I am not suggesting the carriers are going to be bought by the likes of Apple and Google, but I am suggesting the CDNs of the world are going to change and better integrate with network elements.

Who does that and how it happens is now a “wait and see” moment, but the window is closing.