00:00 Speaker A
And finally, ServiceNow is close to buying AI firm Moveworks at a $3 billion valuation, according to Bloomberg. It’s the biggest deal ever for ServiceNow and one of the biggest venture-backed acquisitions in several years. So, with me is Anne Berry of Threadneedle to discuss and, Anne, one of the things that investors were really bullish about in Trump 2.0 was this idea of dealmaking. It was going to be an easier backdrop for dealmaking. We haven’t necessarily seen that kind of bridge cracking open yet since Trump took office again. Is this ServiceNow deal potentially a sign of more dealmaking to come, or is it specific to the company?
00:42 Anne Berry
I think it’s maybe specific to tech. So let’s take a step back. Why was there all this optimism in the dealmaking community that this new administration would bring more M&A? Well, it was supposed to be a low interest rate environment. Perspectives on that are now more conservative. It was supposed to be an era of deregulation. We’re not quite sure exactly what that looks like yet. It was supposed to be an era of lower taxes, corporate taxes, which was conducive to businesses being more confident doing M&A.
01:15 Anne Berry
Instead, we’ve had a bit more volatility than I think deal makers expected. So I think the outlook for dealmaking isn’t necessarily as robust or as near term as people thought coming into 2025. That said, ServiceNow to me is interesting and I think is more indicative of what’s going on in the tech space.
01:41 Anne Berry
So this deal, as you said at the top, Madison, one of the biggest acquisitions of a venture-backed company in recent years. Uh, if you take a look at the acquisition target, Moveworks backed by Kleiner Perkins, backed by Sequoia. This is a really good exit. I think peak valuation for this target was about $2.1 billion. It’s being acquired, so the rumors are for $3 billion. We don’t know yet whether it’s a cash deal, or whether it’s a stock deal. So I wanted to talk a little bit about the Rocket acquisition of Redfin that you touched on.
02:24 Anne Berry
That is an all-stock deal. Now, if you look at Rocket, the share price is up about 300% over the last year. If you’re a tech company, now’s a really good time to be doing acquisitions. Your stock’s probably great currency relative to the past couple of years. If interest rates are going to come down, then that’s a little bit more favorable too, and now’s the time people want to jump on the AI gravy train before things get away from them. So I don’t think necessarily ServiceNow is indicative of dealmaking period.
03:09 Speaker A
Sure.
03:10 Anne Berry
But I do think it’s a sign that, and some of the Sycamore acquisition, that we’re seeing of Walgreens is a sign that private equity dealmaking is perhaps coming back. So these feel like green shoots for sort of M&A new chapter.
03:37 Speaker A
Sure. It was so well explained. So I appreciate you breaking that down. One thing that I’m wondering about is whether or not we might see some pushback from investors in particular if these big tech firms who are already getting dinged for their AI CapEx are starting to spend irresponsibly before the Fed even cuts interest rates, to your point. Is there any risk of that or is the deal making a sign of company health and effective use of cash on the balance sheet?
04:11 Anne Berry
That’s a really great question and I guess if I’m an investor, which I am in many of these, I would be asking myself, when I look at a ServiceNow, do I prefer that they take their cash balance, which is healthy. They’ve got, they had just under $6 billion of cash in their balance sheet as of December.
04:30 Anne Berry
Would I rather ServiceNow invest in building these AI capabilities? Would I rather they take their cash and pay up to go buy something that’s been around and venture backed and proven that it can actually deliver and execute. And I think at this point, because of that pressure to see visibility into how AI works, I think on the margin there’s probably more confidence in buying something that’s been around and proven it can get through proof of concept, proven it can build itself and sell its products than perhaps developing in house.
05:08 Speaker A
It’s a really great breakdown. Thank you so much for that.
