An obvious question arose when the House of Representatives overwhelmingly voted Wednesday to force ByteDance to sell TikTok or face a ban. Who will buy TikTok?
The list of potential suitors is much smaller than in 2020, when then-President Donald Trump tried to force ByteDance to sell TikTok to a U.S. company.
The first candidates at the time were Oracle and Microsoft.
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Oracle ultimately 'wins' TikTok acquisition contest with offer that includes support from Walmart
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The deal never materialized after a federal court blocked President Trump's executive order to force the sale.
It looks like finding a buyer will be even more difficult this time.
First, TikTok is much bigger. The Information reports that his 2023 revenue for the company is approximately $20 billion, and in 2024 he is expected to have $30 billion in revenue. This is about one-sixth of Meta's revenue. Using a similar valuation, TikTok would be worth well over $200 billion.
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The list of M&A deals of this size is limited. AOL paid $182 billion in stock and debt for Time Warner in 2000. Also in 2000, the largest acquisition in history was in the telecommunications sector, when Britain's Vodafone AirTouch acquired Germany's Mannesmann for more than $190 billion.
Another wrinkle is that the antitrust environment has become even tougher under the Biden administration. The most obvious potential buyers include Alphabet.
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Amazon
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And Microsoft will undoubtedly face increased scrutiny from regulators.
Microsoft already has social media activity on LinkedIn, and Alphabet is competing directly with TikTok with YouTube Shorts. Meta also seems like an impossible buy given the highly competitive Reels short video platform.
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Oracle doesn't compete with TikTok, but it effectively generates all of its business by selling enterprise software, hardware, and cloud computing services. The company has no experience operating an advertising-supported business, nor does it operate a consumer-facing business.
And while Oracle values its relationship with TikTok (it eventually became TikTok's cloud computing provider), Oracle's cloud business is now much larger than it was in 2020. , struggling to keep up with demand.
Another factor to consider is that any deal involving stock would necessarily leave ByteDance as a continuing investor in TikTok, an outcome inconsistent with the clear intent of Congress.
Wedbush analyst Dan Ives believes there could be multiple potential bidders, including both strategic and private equity firms. ing.
Ives expects the focus will be on Microsoft and Oracle, as well as the previous major bidders.
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apple
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Although the company does not have a large presence in the social media space, it has both deep pockets and easy access to credit markets. Apple also clearly needs to accelerate its growth rate. However, Apple's established reluctance to engage in targeted advertising will pose a challenge to TikTok's monetization strategy.
Oracle alone cannot finance $200 billion in acquisitions. The company has only a fraction of the cash it needs on hand. This deal won't be easy for Microsoft alone. The company has total cash and equivalent assets of approximately $81 billion.
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Ives believes a joint bid by multiple players is possible, similar to the previous joint bid between Oracle and Walmart. And he thinks TikTok could go through an initial public offering or be spun off to shareholders.
One of the keys to any trading is access to the company's core algorithms. The technology is managed by his ByteDance and is also used in other products, including another short video service based in China.
The bill now goes to the Senate for consideration, but its fate is unclear. President Joe Biden said he would sign it.
But analysts believe this is primarily an academic effort, and the bill is likely to be rejected in court on First Amendment grounds.
Email Eric J. Savitz at eric.savitz@barrons.com.
