Questionable M&A Strategy (Oracle) and Due Diligence (GM)

Questionable M&A Strategy (Oracle) and Due Diligence (GM)

Two head-scratching Technology deals. Oracle’s TikTok deal appears to be smoke and mirrors while GM’s due diligence on its Nikola deal appears to be surface-level at best. Both wreak of desperation.

Oracle’s TikTok deal is high on sizzle, low on substance. Assuming the Oracle/TikTok deal receives U.S. government approval and ultimately closes (we are not sure the deal will close prior to the Presidential Election), Oracle would become a minority TikTok owner. TikTok parent China-based ByteDance would own a majority share. What is in this deal for Oracle? Answer: The TikTok app and 100 million TikTok users (user data would be migrated from Alphabet’s cloud – “GCP” to Oracle’s cloud). Oracle will not acquire control of TikTok’s recommendation engine. The engine is the series of algorithms that drives usage by suggesting people/entities/topics to follow, thereby growing the number of user touchpoints (Instagram and Facebook leverage similar technology). Without owning and controlling the recommendation engine the deal is not worth doing. It appears Oracle founder Larry Ellison wants to make a splash to drive ORCL shares higher after years of languishing.

GM was late to the EV game as were all legacy auto OEMs. GM CEO Mary Barra has had to suffer Tesla and insufferable CEO Elon Musk‘s ascent. In a desperate move GM acquired an 11% stake in Nikola. Nikola interestingly is being investigated for fraud by two government agencies (DOJ, SEC). Some obvious questions are: “What was the extent of GM’s deal due diligence?” “Did anyone at GM kick the tires on Nikola’s vehicles and the underlying technology?” “Did anyone at GM spend time with Nikola’s profanity prone CEO?”

TEK2day can help on the M&A due diligence front. Contact us at info@tek2day.com to learn more.