A "very big wave" of merger and acquisition activity in tech is on the horizon, but a couple things are in the way — high valuations and activist investors, venture capitalist Marc Andreessen says.
"There's a lot of companies that in theory people want to buy, ... [but] they got marked up too much," he said Thursday at the StrictlyVC Series in Palo Alto, California.
"Falling prices are no fun, but they do tend to create options in the form of people starting to be interested in buying," Andreessen said. "So part of it is to any extent any price correction will generally result in more M&A."
The other issue is that large, established tech companies that have the ability to buy start-ups are also dealing with activist investors, he said. Amdreessen pointed to Microsoft, which has activist investor firm ValueAct on its board of directors, something he said would have been "unheard of 10 or 20 years ago."
"If you either had an activist involved at the start of your deals or if you were operating under the threat of an activist becoming involved, you didn't want to do anything to trigger it," Andreessen said.
But these big tech companies recognized that they're "strategically exposed" as technology and the environment change, Andreessen said. While some "can innovate their way into it, internally," most will feel pressured into the "time-honored tradition" of buying smaller companies to enter newer markets, he said.
What Andreessen finds particularly interesting is the increasing number of companies outside of the tech industry buying start-ups. For example, earlier this year General Motors bought self-driving car start-up Cruise Automation. In 2015, Under Armour bought MyFitnessPal.
Andreessen said this trend will likely accelerate.
"If you believe tech is becoming more important in more industries and if you believe that we can build companies in more industries, then it follows that our companies will end up being bought by incumbents in more industries," he said. "That, I think, is a very positive view of how big the Valley can get, how big our industry can get."