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Here is what happens next in Silicon Valley, according to Goldman Sachs President Gary Cohn
(REUTERS/Ruben Sprich)
Gary Cohn.
Giant tech companies are going to go after "unbelievable acquisition opportunities," according to Goldman Sachs' president, Gary Cohn.
In a recent Q&A with The Information's Jessica Lessin, Cohn said that "anything under $10 billion" could become an acquisition target.
He said that when companies' multiples are based on eyeballs or users, they can't be acquired by companies whose multiples are based on earnings because "it's too dilutive."
That's changing.
"One of the tell-tale signs that we're getting close to the bottom will be a big deal — $20, $30, $40 billion," Cohn told Lessin. "If a company can pull it off and their stock isn't penalized, we'll know the valuation multiple for the market."
Private tech companies that have reached the coveted billion-dollar "unicorn" status have been struggling to raise capital.
Cohn said that what happens next is "the bigger get bigger."
In other words, a shakeout is coming that will determine which tech companies will survive and which are destined to fail.
Speaking in Davos, Switzerland, in January, Cohn said that "the marketplace will separate the winners from the losers. They will fund the winners more efficiently than they'll fund the companies whose business model is less secure."
He said that Goldman Sachs views the funding slowdown as "a great opportunity" for the firm.
"We'll go out and raise capital for them," he said.
Cohn said on a recent podcast that he's seen a change in Silicon Valley in the past three or four months, where many companies have been shifting their focus from growth to the bottom line and revenue creation.
"It's actually a positive thing," he said.
Read the full Q&A over at The Information »
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