In 2020, a top Meta executive explained that the company spent $315 million acquiring Giphy "because it's a great service that needed a home." Instagram chief Adam Mosseri touted Giphy's "amazing team" and "expressive" userbase, and stressed that Giphy's user data was "not the motivation."
Earlier this week, Meta sold Giphy to Shutterstock for $53 million, an eye-watering 83% markdown. The sale was forced by the U.K.'s antitrust regulator, which ruled that Meta's acquisition posed a risk to the social media and advertising markets.
It's a paltry sum of money for most tech companies, but the possibility of regulators refusing to approve deals or unwinding them after they've happened has helped chill an already frigid dealmaking environment, experts told CNBC.
"You're seeing deals get done for 20, 30 cents on the dollar compared to what they would have been even six or twelve months ago," America's Frontier Fund advisor and former FDIC chief innovation officer Sultan Meghji told CNBC.
Regulators in Europe and the United States have been eyeing mammoth deals, like Microsoft's $69 billion proposed acquisition of Activision, and smaller ones, like Amazon's $1.7 billion acquisition of vacuum-maker iRobot.
Jonathan Kanter, who helms the Department of Justice's Antitrust Unit, and Lina Khan, the Federal Trade Commission's chair, have been given wide latitude by President Joe Biden to pursue potentially anticompetitive behavior. The federal government has brought cases or opened probes into Amazon, Google, Jetblue Airlines, Meta, and Microsoft.
Prior to his DOJ posting, Kanter worked in private practice, advising directors and executives on potential deals and attendant regulatory pitfalls. Khan made her name with a widely-cited journal article on Amazon's anticompetitive effects.
The Biden administration "has increased scrutiny the scrutiny of deals and enhanced enforcement," Morrison Foerster global risk and crisis management co-chair Brandon L. Van Grack told CNBC.
Van Grack, the former chief of the DOJ's Foreign Agent Registration Act unit, noted that regulatory scrutiny was increasing for years prior to the current administration.
Still, top advisors say that boardrooms are now giving regulatory concerns increased weight. High-profile actions have played a part in that, as has the increasing complexity and number of regulatory regimes.
From the FTC's perspective, the heightened thinking is welcome. "Thousands of deals still happen every year. But if mergers aren't getting out of the boardroom because they would violate antitrust laws, that means we're doing our job," FTC spokesperson Douglas Farrar told CNBC.
The CFIUS factor
It isn't just FTC or DOJ concerns that are slowing deals, either. Publicly disclosed reviews from the all-powerful Committee on Foreign Investment in the United States, or CFIUS, increased 50% since 2020, according to research from PwC.
That number doesn't account for outreach from CFIUS attorneys warning companies off from deals, or for non-public CFIUS review letters. The Committee generally operates in a highly secretive manner, and aside from a public and lengthy review of TikTok parent ByteDance, is rarely in the public eye.
That's because CFIUS is charged with reviewing corporate acquisitions which, among other things, could have an impact on national security. Even the suggestion of a CFIUS probe can neuter a deal completely or displace a favored bidder from the running.
The cryptocurrency exchange Binance, for example, reached an agreement to acquire bankrupt crypto lender Voyager Digital in late 2022. Binance's bid was accepted after Voyager's first agreement with the allegedly fraudulent crypto exchange FTX fell through because of the latter's November 2022 bankruptcy filing.
Shortly after the Binance-Voyager deal was announced, CFIUS filed a letter notifying Voyager that it would be reviewing the deal.
CFIUS is a powerful "tool" in the U.S. government's arsenal, Van Grack told CNBC. Through CFIUS, the Department of Justice has been able to take an "increasing role in reviewing and scrutinizing these transactions," Van Grack said.
The international scope of most deals has complicated matters further. It isn't just one regulator that can weigh in on an acquisition or a merger. The first question now has to be "how many jurisdictions do we touch," Van Grack said.
From there, appeasing regulatory concerns, whether they are on anticompetitive or national security grounds, can mean divestiture or mitigation. It can also mean, as with the CMA in the Activision-Microsoft deal, that regulators move to block a deal in its entirety.
As boardrooms and executives weigh deals large and small, advisors are being forced to confront a global panoply of competing regulatory interests, Van Grack said. "It is just more complex network: 'Are we going to get approval? How long is it going to take? Will there be mitigation, and what would that mitigation look like?'"
"Those questions are becoming more challenging to answer," he said.