7.TECHNOLOGY – BUILD OR BUY? This is a quandary for most companies, but is especially acute for technology companies. Acquiring technology through acquisition can be an excellent growth strategy. The R&D costs are generally lower for these smaller, agile, more narrowly focused companies than their larger, higher overhead acquirers. Time to market, window of opportunity, first mover advantage can have a huge impact on ultimate success of a product. First one to establish their product as “standard” is big winner

8.ACQUISITION TO PROVIDE SCALE AND ACCESS TO CAPITAL MARKETS – In this area, bigger is better. Larger companies are considered safer investments. Larger companies command larger valuation multiples. Some companies make acquisitions in order to get big enough to attract public capital in form of an IPO or investments from Private Equity Groups.

9.PROTECT AND EXPAND MATURE PRODUCT LINES – This has been very effectively done in pharmaceutical sector where a new technology is acquired to repurpose and re patent drugs.

10.PROTECT CUSTOMER BASE FROM COMPETITION – The telephone companies have done studies that show that with each additional product or service that a customer uses, likelihood of customer defecting to a competitor drops exponentially. Get your customers to use local, long distance, cellular, cable, broadband, etc and you will not lose them. Multiple products and services provided to same customer dramatically improve retention rates.

11.ACQUISITION TO REMOVE BARRIERS TO ENTRY – For example, a large commercial IT consulting firm acquires a technology consulting firm that specializes in Federal Government. The larger IT consulting firm has valuable expertise that is easily transferable to government business if they could only break code of vendor approval process. After many fits and starts, they simply acquired a firm that had an established presence. They were able to then bring their full capabilities from commercial side to effectively increase their newly acquired government business.

Many larger firms have established business development offices to execute corporate growth strategies through acquisition. These experienced buyers search for companies that fit their well-defined acquisition criteria. In most cases they are attempting to buy companies that are not actively for sale. The win for successful corporate acquirer is to target several candidates, buy them at financial valuation multiples, integrate to strength and achieve strategic performance.

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