Ancestry.com Considers Acquisition of 23andMe ‘Challenging’ Due to Antitrust Concerns

In light of declining sales for DNA test kits, Ancestry.com Inc. has publicly indicated that acquiring its closest competitor, 23andMe Holding Co., would likely face insurmountable antitrust obstacles. According to Bloomberg, Ancestry’s Chief Legal Officer Greg Packer addressed the prospect of a takeover in an internal meeting last week, emphasizing that regulatory scrutiny would be a significant barrier to a merger.

“23andMe specifically would be challenging because they’re the No. 2 in the category, and we’re the No. 1 in the category,” Packer remarked, noting that the Federal Trade Commission (FTC) would probably view the merger as potentially monopolistic. As competitors in the highly consolidated consumer DNA-testing market, Ancestry and 23andMe are uniquely positioned at the top of the sector, which heightens the antitrust complexities surrounding a potential acquisition.

Founded by tech industry veteran Anne Wojcicki, 23andMe went public in 2021 through a merger with a special purpose acquisition company (SPAC) established by billionaire Richard Branson, a deal that originally valued the company at $3.5 billion. However, per Bloomberg, the company has since seen a dramatic 98% plunge in its stock value amid a significant downturn in demand for consumer genetic testing. In response to this decline, Wojcicki recently stated she is no longer open to third-party takeover offers and intends instead to take the company private. All independent board members resigned last month, signaling a strategic pivot for the company.

Ancestry’s Chief Operating Officer, Howard Hochhauser, also weighed in on the potential acquisition, saying he’s not certain Ancestry would pursue a merger even if regulatory constraints were lifted. “We have the best product and the best network of data,” Hochhauser said, highlighting a recent uptick in Ancestry’s DNA testing kit sales. The company’s proprietary database contains genetic information from over 25 million users, which has become a valuable resource in both family history and genetic research.

Ancestry, under the leadership of CEO Deborah Liu, a former Meta Platforms Inc. executive, is the largest company in the consumer genealogy space, generating over $1 billion in annual revenue. In 2020, private equity firm Blackstone Group acquired a majority stake in Ancestry, solidifying its financial foundation and signaling the company’s robust potential. According to Bloomberg, Blackstone’s investment and Ancestry’s current market dominance place the company in a favorable position as it navigates the competitive landscape.

While a union between Ancestry and 23andMe could theoretically consolidate data and resources, enabling a comprehensive expansion in consumer genetic research, regulatory resistance and 23andMe’s recent private shift make it unlikely. For now, both companies appear set to remain independent, focusing on bolstering their respective market positions as consumer interest in at-home genetic testing continues to wane.

Source: Bloomberg