Silicon Valley Gears Up for Acquisitions as Economy Improves

Silicon Valley companies looking to put their cash to work may drive a wave of mergers this year, bankers and venture capitalists say. Companies are eager to make acquisitions because many of them have cut research budgets, says Robert Ackerman, founder and managing director of Allegis Capital. That means they're not as able to fall back on their own ingenuity to fuel growth. More businesses are relying on acquisitions to find their next new product or service, he says. "The product cabinet is bare, but the market continues to move forward," Ackerman said. "Wherever you see innovation sprint ahead, companies will have a product deficit, and will look to fill it." In Northern California, there were 45 deals involving venture-backed startups during the first three months of 2010, according to the National Venture Capital Association. That was the highest number in any quarter in at least five years. More than 50 companies in California have at least $1 billion in cash and equivalents, which they could use for acquisitions. They're led by a Bay area trio: San Francisco's Wells Fargo & Co., with $68 billion; Cisco Systems Inc. in San Jose, with $39.6 billion; and Cupertino-based Apple Inc., with $24.8 billion.