Jose de Cabo, co-founder visual marketing platform Olapic, shares his views on how tech companies can address the challenges of M&As in order to reap the benefits.
Speaking from my own personal experience at Olapic and our recent acquisition of the visual tech startup Piqora, I have learnt that even with the many opportunities M&As present, this type of activity has nonetheless seen large corporations struggle with integrations.
They are not impossible – but they must be handled with care.
Here are some key aspects to take into consideration for any booming tech businesses contemplating M&As.
Integration
The way to successfully navigate the transition phase is to develop a strategic integration plan which allows for the two companies to merge their technologies.
It is fundamental to be inclusive and recognise that every area of a business will most likely be impacted in some way.
Bringing teams together that have spent years facing the same issues has the potential to generate immense creativity and accelerate the pace of innovation, but this is will only happen if both teams have the right leadership.
Leadership
Identifying the relevant leadership from each business – those with relevant training, experience and agility – will drive the success of an M&A.
The leadership team will have to deal with any HR sensitivities which may arise, while also managing the expectations of the founders.
After all, they are the ones who are essentially handing the keys to their business and for the transaction to take place in the smoothest way possible it’s vital to tread respectfully.
Compatibility
Then there is compatibility which is at the centre of any tech acquisition.
The ultimate example is Yahoo’s acquisition of Tumblr in 2013 for $1.1bn.
The acquisition failed to deliver a desperately needed revenue boost with Yahoo recently reporting that it wrote down the value of Tumblr by $230m.
Some say the acquisition didn’t work for Yahoo because Tumblr was too small and others that Yahoo was simply buying anything and everything – it’s growth and innovation strategy failing as they acquired dozens of promising sites– but with a lack of strategic focus.
So the approach to any M&A must be careful and unhurried. But most of all compatible.
Culture
Finally, like-mindedness in company cultures is of the essence, and one of the biggest drivers of success versus failure.
It is very hard to evaluate cultures because sometimes it is down to nothing more than gut feeling and instinct.
Company values and culture need to be aligned or not too far apart, as there is a risk of clashing and negativity that might hinder the success of the teams on both sides.
There needs to be understanding, transparency and open gateways of communication between the founders to establish the grounds.
An ideal way of testing the water is a one-off partnership with a time limit, which you can evaluate before deepening the relationship.
Got the fundamentals covered? Time to fast-track growth.
New innovation
In our sector, M&As bring disparate yet complementary technologies together to create new innovations at their juncture. There are three main ways M&As drive development and expansion.
Bringing a unique in-house product offering with partners that provide what your business cannot.
Every tech startup has a unique way of approaching problems and developing solutions – but when you bring two perspectives together, invaluable ideas fly.
Acquisitions can fast track a company’s growth in unexpected ways, like geographical expansion into new markets by combining existing footprints.
By joining roadmaps, you are en route to expanding new revenue streams developing the internal capability to deliver this.
Each company has its own talent pool and customer base to offer.
But with M&As, two become one.
By bringing teams together, it saves time and effort in searching for new team members, while keeping all the benefits: refined processes, streamlined thinking and wide-ranging expertise.
And growing your customer base by merging it with another allows you to expand into new verticals or territories, ultimately driving sales.
Overall, M&As can result in industry-first products and cutting-edge technologies.
But this can only be achieved with the right choice of partnership, and the right handling of the merge.
Take care and take time with every decision, as it will write the future for your business.