UBS: Apple is unlikely to do a ‘mega-merger’ but there are some areas that might make sense

REUTERS/Lucy Nicholson

Apple CEO Tim Cook.

With a market cap of $776 billion (£599 billion), Apple is the world’s most valuable company. That means it has more money to splash on large acquisitions than most — more than $250 billion (£193 million) to be precise.

Yet analysts at UBS said in a note to investors on Tuesday that the probability of Apple making a “mega-merger” in the near future is low.

“Our view is that the probability of mega-mergers is low as it should be,” wrote UBS analysts Steven Milunovich and Benjamin Wilson.

Several large companies have been linked to a potential Apple acquisition including Netflix, Tesla, and Disney.

Acquiring Netflix would help Apple to close the content gap that is opening up between itself and Amazon and allow the Cupertino company to move towards a subscription-based model.
Acquiring Tesla would instantly catapult Apple to the forefront of the automotive industry and save it from having to set up its own car manufacturing facilities.
Acquiring Disney would allow Apple to create “a tech/media juggernaut like no other,” RBC analysts said last month. “The resultant company would be massive, with enough cash and balance sheet capacity to change the nature of the hardware, service, and content industries,” the analysts wrote.

But UBS analysts said on Tuesday that “the majority of what has been proposed doesn’t fit, in our view.” They added that Apple has an “unusual culture” that could make “integration challenging.”

Milunovich and Wilson went on to highlight several areas where it would make the most sense for Apple to acquire a large company, adding that Apple needs to diversify away from the iPhone and catch up in certain markets.

“[Tim] Cook has said he is not averse to a large deal, but we think it would need to leapfrog Apple ahead in an area of interest, such as transportation, A/R, health, home automation, and perhaps content,” they wrote.

The analysts also explained that Apple is likely to surprise people if it does decide to pursue a mega-merger. “Apple’s DNA is indeed to think different, to bring uniqueness to the table.”