View / M&A has become unrecognizable

When we broke the story of Microsoft’s $10 billion investment in OpenAI in January 2023, I said two things that now seem pretty stupid.

First, I asked my colleague Reed Albergotti what OpenAI was. Second, I confidently said on CNBC that people should think of the deal more like a takeover than a venture investment.

Today, OpenAI is a household name, and M&A is unrecognizable. Microsoft didn’t have a straight economic stake (OpenAI was then a nonprofit) or traditional control (it blocked Sam Altman’s brief ouster not by voting against it in the boardroom but by threatening to hire him and any other OpenAI employees who wanted to come).

That deal was the beginning of a rewiring of the market for corporate control. The standard options — buyers could pay cash or stock — have been replaced by a choose-your-own-adventureland where tokens are the new currency, employees are vital assets, antitrust is an afterthought, speed is everything, chokepoints matter more than control, and often the math doesn’t even pretend to add up.

Take SpaceX’s deal for Cursor. The coding-software startup will get acquired for $60 billion, maybe, sometime, if Elon Musk feels like it. The $10 billion that Cursor keeps even if the deal doesn’t happen looks, to my traditional M&A reporter brain, like the largest breakup fee on record (a smart move, given Musk’s penchant for getting cold feet). When you squint, it’s more like the biggest option premium in history. SpaceX has compute; Cursor needs compute to train its models. But in a normal world, you don’t spend $60 billion to acquire your own customer. You invoice them.

In the Before Times, a company preparing for the largest IPO ever would simply decide it wasn’t the right moment to spend $60 billion on an unprofitable startup. In the AI Times, things are moving too fast for SpaceX to wait. The new M&A vocabulary is being written in real time: acquihires, equity-for-compute, and the massive amounts of capex (see Tesla’s $25 billion announcement yesterday) that has squeezed out traditional takeovers. Adobe tried to buy Figma; now Anthropic is spending heavily to build its own.

There will still be some AI-tinged, normal-ish M&A — Jeff Bezos is plotting a new Berkshire Hathaway — but the industry’s frontmen are upending deal-making just like they are upending everything else. Add in the US government’s newfound taste for investing, and the landscape for corporate control is quickly becoming unrecognizable. The Microsoft-OpenAI deal wasn’t an anomaly. It was the first lesson.