Like many of its Silicon Valley peers, the Google parent company has built up a massive war chest of cash that could be prime ammunition for M&A. As of the end of the second quarter, Alphabet had $94.7 billion in cash and marketable securities, of which 61%, or $57.9 billion, is held overseas. Among the tech companies in the S&P 500, Alphabet has the seventh-largest share of cash held overseas, with Apple Inc. (AAPL) claiming the top spot at 93%, according to Bloomberg.
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The possibility of a coming tax holiday has spurred excitement among investors who believe it may give tech juggernauts such as Alphabet and Apple a way to put their cash to work. President Donald Trump has indicated that he favors a tax policy that would allow companies to repatriate their cash back to U.S. soil at a tax rate of 10% instead of the usual 35%. In that scenario, Alphabet could bring back roughly $52.1 billion in cash, which added to its domestic holdings, would give them about $89 billion for acquisitions.
Alphabet's growing cash pile has caused many analysts and investors to speculate who could be next to land in its crosshairs. The latest rumor is that Alphabet tried to buy Snap Inc. (SNAP) for at least $30 billion in early 2016. There are plenty of reasons why such a deal may or may not work, but the arguments against seem to dwarf any arguments in favor. To some degree, Alphabet already has a social media network in YouTube (which it acquired for $1.65 billion in 2006), with its user-generated content and ability for users to interact with each other. The company also doesn't need any help in video advertising -- it claims 33% of the world's $223.7 billion digital advertising market.
"What does Snap provide [Alphabet] that YouTube doesn't have? Very little," said Pivotal Research analyst Brian Wieser. "I don't think many people would expect this deal to happen."
Alphabet has always been cautious about making splashy, blockbuster deals, CFRA Research analyst Scott Kessler noted. He added that it's possible that Alphabet approached Snap and that the talks fizzled out. A similar situation happened when Alphabet made a $5.75 billion bid for Groupon (GRPN) in 2010. Groupon rebuffed the offer after investors believed it had more room to grow; since then, Groupon has struggled on its own and currently only sports a $2.3 billion market cap.
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