Large companies in industries ranging from retail, to aerospace, to financial services are buying talent and technology to develop new digital capabilities and reinvent themselves quickly. But they will need to adopt the more hard-headed way that Silicon Valley companies evaluate acquisitions for their deals to pay off.
Don’t Acquire a Company Before You’ve Asked These Questions
What Silicon Valley knows about M&A.
May 28, 2018
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Summary.
Acquisitions can be a tempting strategy to quickly develop new capabilities and penetrate new markets. But for those deals to be worthwhile, companies must ask themselves several key questions. First, what would the true costs of integration be? Second, would it be feasible to replicate the new capability or target this new market by simply creating an offshoot business unit, rather than a full-blown acquisition? And finally, if the technology you’re considering acquiring is so appealing, would a pivot of your own company not be a more effective strategy than an acquisition? In many cases, the driving factor that makes or breaks an acquisition is not the product itself, but rather, the business model that defines how that new technology will be incorporated into your existing business.