As economy sours, Cisco and others expected to crank up M&As

Mergers and acquisitions among "Internet" companies like Cisco could grow significantly this year and next as these companies look for other avenues of growth in a down economy.

According to report in, JP Morgan analyst Imran Kahn expects healthier companies to swallow up smaller, less healthy ones as the GDP declines 2.2% this year. Among the healthier companies are Cisco, Microsoft, Amazon, eBay, Priceline, Google and Yahoo.

These companies combined have built up a cash hoard of $77 billion, according to the report, citing Kahn's research:

Even with the turbulence in the economy one can't expect these companies to simply park their cash in a savings account. They will have to keep an eye out for attractive deal opportunities as a responsibility to their shareholders. 

Cisco itself is sitting on almost $30 billion in cash and recently launched $4 billion in debt, leading to speculation that it is readying a significant acquisition.

Indeed, larger companies may now swing back over to the buy vs. build strategy as they increase R&D spending this year by only a fraction of 2008's hike -- 8% vs. 25%. Companies were focused predominantly on the "build" strategy in 2008, which resulted in only 45 acquisitions by the large "Internet" companies vs. 94 in 2007, according to Kahn in the report.

And which smaller "Internet" companies are ripe for the picking this year? Kahn believes Omniture, an online analytics company, and MercadoLibre, a Latin American e-commerce company, are the most likely to be acquired, according to the report.

Shutterfly, The Knot, and Expedia also made the list. 

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