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Two Types of
Acquisitions |
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Traditional or Synergistic Acquisitions – taking over of
one established corporation by another; main objectives – reducing
costs through consolidating duplicate operations; increasing
revenues and customer base.
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Venture Acquisitions
– complement or substitute for research and product development;
main objectives – enhancing product portfolio; entering new markets;
acquiring and retaining talented and motivated people.
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Reasons Why 2/3 of Traditional Acquisitions Do Not Deliver Expected
Results1 |
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too high aspirations from
the very beginning
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companies turn to be less
compatible than had been hoped
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both the acquirer and the
acquired underestimate the difficulty of integrating operations and
bringing together contrasting
corporate cultures
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Why Mergers &
Acquisitions?
The role of mergers and
acquisitions has evolved as a strategy tool for fast-track technology-led
companies. In the current rapidly changing environment and in the era of
systemic Innovation, where
technology is embedded in people and processes, well-planned M&A are
recognized as critical to fast-track technology company success – and even
survival.
The four main reasons for
making an acquisition include:
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To acquire complementary products,
in order to broaden the line
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To acquire new markets or
distribution channels
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To acquire additional mass, and
benefit from economies of scale
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To acquire technology, to
complement or replace the currently used one
Merger synergies are great as they
may give companies the needed technology, people, infrastructure, global
sales, marketing and distribution opportunities. This is the reason why the
majority of technology companies that go public tend to be acquired within
two years after the flotation.
M&A
strategies
to address market challenges include:
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Rolling up existing suppliers and
customers to gain market share
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Rolling up companies to buy
customers and enabling technology
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Merging forces with competitors to
obtain scale
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Initiating a new business by
purchasing one with the necessary content or elements
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Adding a new vertical category to
an existing business
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Acquiring enabling infrastructure
to support marketplaces and the associated
supply chain
Venture Acquisitions
In
today's era driven by
systemic innovation, acquiring and integrating
capabilities,
know-how, and technologies has become an efficient route to growth and a
strong alternative to internal research and product development. Acquisition
and integration of ventures is an effective method for supplementing a
product and business portfolio with the best available technology, as well
as enter emerging markets, with speed.
Companies that chose a venture acquisition
strategy are challenged to rethink the role of R&D and
knowledge management within their corporations, to fit the new offerings
with the near-term strategic and operating portfolio, and to prepare a
sales, manufacturing, and distribution organization. This challenge requires
learning about priorities, markets, technologies,
speed of product/service development, integration of
achievement-oriented people, and
cultural fit. "These challenges are viewed from the perspectives of
acquiring management and the about-to-be-acquired entrepreneurial leader and
organization. This is an art, not a science, and it is easier to develop as
a plan than it is to implement. After all, the human element is a critical
component of this process."1 ...More |
