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Should Google buy AIG?

With a market cap of ~ $65 billion , this is a $40B+ acquisition. On the other hand if Google decides to invest/burn $40B in the insurance business, combining it's current capabilities , i'm sure they could get far, since the insurance business relies heavily on data and marketing , both of Google has plenty.
 
Of course that would also get Google into the shark-infested waters of "creative" financial instruments which is probably very far from their skillset.
 
True, but you can buy a much smaller company than AIG to get that skillset - the purchase price of buying AIG is mostly for buying their clients and their brand and removing them as competition.

But IDK , i could be wrong, because i personally don't understand half the m&a done these days , and the fact that companies can't "find places to invest their money" , in a world that is full of problems , but also filled with unique technologies and business ideas with a lot of potential to solve those problems.
 
Probably the real weakness of the idea is merging a tech company (from which the market expects growth) with a financial company (which pays off in dividends, buybacks, whatever, but not especially growth). If Google could turn AIG into a growth Finance/Tech company that might be different but I hope memories of the 2008 collapse, fueled by over-creative ideas in that sector, will steer us away from any such abomination.
 
I really wonder about the disclosure status of some of these Seeking Alpha ideas and the analysts behind them. I know #fintech - shorthand for Financial Technology - is all the rage these days, and Google could probably devise some big-data-fueled algorithmic enhancements for at least some of the AIG lines of business. But, why would Alphabet burn this kind of money on a dividend play, when they can generate a higher ROI with the same capital invested elsewhere? File this one under 'D' for disruption solely for the sake of disruption to help somebody's mutual fund position.
 
Insurance industry is a highly competitive and crowded market with a lot of local and federal regulations. Although there are some weak players, there are several well-run insurance companies such as Berkshire Hathaway's GEICO and State Farm. I think Google or Apples will prefer to venture into automobile than insurance industry.


Another problem with insurance industry is that their profit is highly linked to how nature behaves in a particular year. A earthquake, a hurricane, or a tornado can wipe out a big chunk of their profit. They know it but can't do much about it, even with re-insurance coverage. I don't think either Apple or Google will enjoy this problem. They like to control their own destiny.
 
Bernard Murphy said:
Of course that would also get Google into the shark-infested waters of "creative" financial instruments which is probably very far from their skillset.
Click to expand...
Bernard, When you talk about Google, forget about skillset and related areas. I haven't seen many companies as diversified as Google, in many unrelated areas.
 
Pawan Fangaria said:
Bernard, When you talk about Google, forget about skillset and related areas. I haven't seen many companies as diversified as Google, in many unrelated areas.
Click to expand...

Berkshire Hathaway is very diversified. IMHO, they are probably more (or at least equally) diversified than Google. In a way Google is following a similar structure of Berkshire Hathaway to grow and manage their business.
 
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Pawan Fangaria said:
Bernard, When you talk about Google, forget about skillset and related areas. I haven't seen many companies as diversified as Google, in many unrelated areas.
Click to expand...
I don't know about that Pawan - they are diversified in tech, not in the general market. There's a big difference between experimenting with autonomous cars, broadband, home automation and other tech oriented stuff and getting into a completely different market. Possibly they could become a GE or Berkshire Hathaway of tech but they'd need to find themselves a Jack Lynch or a Warren Buffet to pull that off and then playschool would be over for a lot of Googlers. Not that it isn't an interesting idea.
 
Don Dingee said:
I really wonder about the disclosure status of some of these Seeking Alpha ideas and the analysts behind them. I know #fintech - shorthand for Financial Technology - is all the rage these days, and Google could probably devise some big-data-fueled algorithmic enhancements for at least some of the AIG lines of business. But, why would Alphabet burn this kind of money on a dividend play, when they can generate a higher ROI with the same capital invested elsewhere? File this one under 'D' for disruption solely for the sake of disruption to help somebody's mutual fund position.
Click to expand...
Also worth remembering that algorithmic prediction in finance is not new. The "quants" have been around for quite a long time and are probably far ahead of tech giants in applying big data analytics among many other techniques. Problem is and always has been that this approach to forecasting, especially when coupled to automatic trading, has potentially much more disastrous impact than for picking baseball players. I doubt Google would make this better.
 
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Bernard Murphy said:
There's a big difference between experimenting with autonomous cars, broadband, home automation and other tech oriented stuff and getting into a completely different market.
Click to expand...
Bernard, Google can always justify the relation whether it is tech or not. They are experimenting on new technology for autonomous cars. At the same time, I was hearing they wanted to enter taxi business like 'Uber'. The two business models are completely different although related to car.
 
It seems like google is mostly about innovation and creating new things. Buying a large established financial institution does not fit with this at all. What's more, when they did go out a buy and established brand, Motorola, they kind of got burned. I would think they could use their money in much more interesting ways. They certainly have no shortage of ideas. They are working on semiconductors, artificial intelligence, cars, and who knows what else.

OR, maybe they do need AIG because how else are you going to insure self driving cars.....
 
Tom Simon said:
It seems like google is mostly about innovation and creating new things. Buying a large established financial institution does not fit with this at all. What's more, when they did go out a buy and established brand, Motorola, they kind of got burned. I would think they could use their money in much more interesting ways. They certainly have no shortage of ideas. They are working on semiconductors, artificial intelligence, cars, and who knows what else.

OR, maybe they do need AIG because how else are you going to insure self driving cars.....
Click to expand...

I think Google bought Motorola's mobility division primarily for those Motorola's patterns. It's an effective way to protect Google from all kinds of IP lawsuits and to gain ability to retaliate those others with countersuits.

The following article gives us an interesting perspective about if Google really had lost big money in the Motorola deal.

Motorola may not have hurt Google's bottom line quite as badly as it seems | Android Central
 
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