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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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Main Objectives of
Acquisitions and Integration of Ventures |
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to complement or substitute
for research and product/service development
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to supplement the existing
product and business portfolio with the best available technology
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to enter emerging markets
with
speed
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to acquire and retain talented and
motivated
people
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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.
Smart Business Architect
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 and ability to strike a deal within twenty-four
hours and close it within two months.
3 Strategies of Market Leaders
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. In 1994, Cisco acquired
three companies, in 1995 –
four, in 1996 – seven, in 1997
– six, in 1998
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nine, in 1999
– eighteen, and in 2000
– twenty-three.
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...
More
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 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...
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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.
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