Strategies of Market Leaders:
Venture Strategies

Venture Acquisitions

Supplementing Your Product and Business Portfolio With the Best Available Technology

 

Vadim Kotelnikov personal logo Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

 

 

"Not only do technology businesses need to attain bigger scale, obtain enabling technology and recruit talented, qualified people, they have to do it faster and more efficiently that their competitors." ~ Tim Miller

 

 

Two Types of Acquisitions

  • 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.

  • 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.

Main Objectives of Acquisitions and Integration of Ventures

  • to complement or substitute for research and product/service development

  • to supplement the existing product and business portfolio with the best available technology

  • to enter emerging markets with speed

  • to acquire and retain talented and motivated people

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Venture Strategies

Radical Innovation

Corporate Venture Investing

Strategic Partnerships

Strategic Alliances

Joint Ventures

Mergers and Acquisitions

Getting People Issues Right in Mergers and Acquisitions

Acquisition Letter Sample: Acquisition Funding Request

Business Valuation

Buying a Small Business: Determining the Value

 

Venture Acquisition Strategies

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

 Case in Point  Cisco Systems Inc.

Cisco Systems Inc. used the venture acquisition approach with remarkable success. The company has pioneered the use of carefully designed and effectively operated acquisition process governed by hard-and-fast criteria and ability to strike a deal within twenty-four hours and close it within two months.

Cisco listens to the market, and if it doesn't have what the market wants, it uses company stock to buy a start-up or an emerging company that already has the product and integrates the new company along with its technology, as fast as possible.

 Case in Point  Google

Google acquires innovative companies to diversify Into new areas or to add value to existing technologies and services.

From 2001 to 2011 Google acquired over 100 companies based in USA, Australia, Brazil, Canada, China, Finland, Germany, Greece, Ireland, Israel, South Korea, Spain, Sweden, Switzerland, UK. Thanks to these acquisitions the company created new profitable businesses as context advertising, mobile advertising, video advertising, Internet-boutiques and business e-mail.5

 Case in Point  Apple

Apple's venture investing and acquisition strategy is not very aggressive To stay ahead, Apple usually over-invests in its supply chain. The company is reported to pay a significant portion of the factory construction cost in exchange for exclusive rights to the output for a set period of time, and then for a discount once this period expires. Not only does this allow Apple to come out with new components long before rivals, but these components are very difficult to duplicate.

The company makes fewer acquisitions than their competitors. From 1988 to 2011 Apple acquired 20+ companies based in USA, Australia, Canada, and Germany. When Apple buys companies, it's almost always tight lipped about how they will fit into its strategy and how easily their technologies can be integrated into existing company projects. Yet, some acquisitions stand out in terms of adding important features to existing product lines or opening doors into new markets.4

Being Acquired

Ideally, a company considering being acquired can first work with its corporate candidate to sample the relationship. One way of accomplishing this is by accepting a strategic investment. However, the benefits and the risks for both sides must be weighed carefully. Relationships don't always develop into the merger or the acquisition.

Having a strategic investor is definitely a double-edged weapon. Before accepting corporate investments, companies should be sure that the investing company's agenda is consistent with theirs and be certain that they are prepared to manage conflicting agendas. Start-up companies must be sure to consider the universe or potential investors and what effect having one of those investors on their board will have on the others.

Winning is not necessary achieved without partners and parents. Expand your search to the international marketplace. Prepare the team, as well as your investors, for the possibility of acquisition as means to realize the full potential of the company's entrepreneurial vision.

 

References:

  1. Venture Catalyst, Donald L. Laurie

  2. Mergers and Acquisitions, J.Fred Weston and Samuel C. Weaver

  3. How Boards Can Say Nay to M&A, Robert Gertner

  4. 'Venture Acquisitions by Apple,' Vadim Kotelnikov

  5. 'Venture Acquisitions by Google', Vadim Kotelnikov

  6. 'Apple's Innovation Strategies', Vadim Kotelnikov