The way I see it, even at Google, small M&A deals are just staffed by a bunch of aggro nerds who have a lot more "egoistic hot shot" than "civilized decorum" about them. It seems possible they were bluffing — getting organizational buy-in and staffing a small project at Google has relatively enormous overhead. So for tiny projects (<$1M), buying is nearly always cheaper.

Best response, I imagine, would be "ok, why don't you guys figure out how much that'll cost you and we'll circle back to talk numbers again. looking forward to it!"