06 Aug Successful Tech M&A Tips
Whether integrating new product lines or opening into new markets, acquiring a company can be highly rewarding. Tech firms may gain access to new intellectual property, allowing them to jump over their competition with less effort than doing so would otherwise require. Yet M&A is rife with difficulty, and even the largest entities can struggle. When Google sold Motorola Mobility to Lenovo, it did so at a considerable loss—though it did retain a number of Motorola patents.
M&A isn’t just for tech giants. Regardless of your business size, these strategies can help you make the most of an acquisition.
Know What You Are Purchasing
Tech mergers and acquisitions face significant integration issues, as well as some tech-specific challenges. When one company purchases another, it needs to be certain about the economics, and clear about the financial investment that taking tech to the next level demands. This is usually the most challenging component of M&A.
The tech in question may be cutting edge, and therefore untested. This demands a deep understanding of how integration will work, and how the future technology may affect either company’s bottom line. Businesses must consider whether the company is scalable.
IP is one of the most important things to investigate prior to closing. Does the vendor fully own the tech they are selling? Does that tech depend on any third parties?
Take Care of Your Brands
Every brand needs loyal supporters. In tech, differences in support can make a significant difference. Consider how loyal people are to smartphone brands. So tech integration, especially of cultures, is critical. If your platform is customer-facing, it is important to weigh whether you want to integrate or maintain separate brands. Open communication is important from day one, and can ensure customers remain engaged.
A merger of multiple products often takes much longer than merging two companies. Switching everyone to a single platform will not usually produce the hoped-for cost synergies because people do not want to switch. You may end up running the two companies in parallel. Research shows that many companies continue to operate two separate brands for longer than they anticipated, and much longer than they should. Plan ahead for the merger of each brand, and know what you’ll do if initial efforts lag.
Failures of integration are the leading cause of M&A failure. Tech companies that hope to be acquired must ensure that their technology is scalable, with the potential for integration into another system.
The good news here is that tech companies usually have an advantage in terms of integrating people, policies, and systems. Most firms have a set development cycle.
You must also consider your people. Every company builds its own unique culture. Fostering a culture that makes people feel welcome and valued is critical to keeping your people on board. Companies that are built solely on the charisma of a founder may struggle with integration, but those that have well-trained managers and a staff that is committed to running the company going forward can thrive.