"Strategic growth acquisitions require a clear vision as well as a plan to deliver incremental value — and the flexibility to listen and adjust to the market as necessary."Erika Schraner, Americas Technology Operational Transaction Services Leader, Ernst & Young LLP
The challenge of integrating cloud computing, smart mobility and social networking
Integration has never been more challenging than it is today, as powerful megatrends such as cloud computing, smart mobility and social networking are launching a time of hyper-innovation.
In 2Q11, such deals ranged from picking up key talent by buying a two person company to 10 multibillion dollar deals. Extraordinary discipline and a dual focus — with one eye on strategy and the other on operational execution — is required for the resulting transaction integration journey to deliver true incremental growth in shareholder value.
Identify gaps – then address them
For example, from an operational perspective, companies must be prepared to address the impact on both organizations efficiently, capitalizing on synergies quickly. This means developing at a detailed level the operational blueprint that maps the "as is" to the "to be" operational model, capturing the difference in business models between the buyer and the target and identifying how the gaps will be addressed.
While this is an onerous exercise, if done well, it will prevent unpleasant surprises down the road. Furthermore, immediate cost containment or opportunistic cost-cutting and operational improvements can be recognized and implemented rapidly through this process.
Be strategic and flexible
From a strategy perspective, companies must have clear objectives, deep understanding of both businesses and cultures and inherent flexibility — capable of addressing issues as they arise and making midcourse adjustments as necessary. For example, earn-out milestones defined as part of the initial transaction negotiation with many private company acquisitions sometimes conflict with the organization's subsequent strategic goals.
How such conflicts are recognized and managed can be critical to a deal's ultimate success. Moreover, success in a strategic purchase requires the buyer to quickly identify key talent and intellectual property assets and take immediate and aggressive steps to protect and retain them. Finally, growth transactions are not for the faint of heart. They are high-risk, high reward propositions that require a clear vision, engaged leadership and frequent communication of expectations.
Global technology M&A update: 2Q11 highlights is a comprehensive report on the industry's transaction activity in the quarter. It provides in-depth analysis of the quarter's statistical results and deeper dives into the above trends.
Executive bytes is a related and ongoing series where we take a closer look at what's happening in specific segments of the technology sector.