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:

1. To acquire complementary products, in order to broaden the line

2. To acquire new markets or distribution channels

3. To acquire additional mass, and benefit from economies of scale

4. 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:

• Rolling up existing suppliers and customers to gain market share

• Rolling up companies to buy customers and enabling technology

• Merging forces with competitors to obtain scale

• Initiating a new business by purchasing one with the necessary content or elements

• Adding a new vertical category to an existing business

• 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