In high-tech industries, success hinges on creativity, speed of new product development, and cost-effectiveness. But these traits can't sustain long-term profitability if a company cannot continually develop and expand its capabilities. This has prompted industrial companies to acquire technology businesses at an increasingly rapid rate in recent years. This has created a unique set of integration challenges. Successful acquirers follow simple principles to avoid smothering their targets while unlocking their potential.
The people at the target company are often a key factor in high-tech acquisition success. They provide a source of technical talent that can help develop innovative products and services, facilitate new product launches, and accelerate the transition to a new business model (Prentice & Fox 2002).
Acquirers must ensure these new people feel welcome, have a clear sense of direction, and are committed to their success. They also need to make it as easy as possible for them to transition from one company to the next.
The best acquirers spend time, effort, and money on this critical area. They conduct employee surveys, designate a team of experts to guide the integration process, and offer incentives such as stock options or other contingent stakes.
One of the key factors in capturing the real value in high-tech acquisitions is to focus on the technology. Because these industries are fast-paced and changing, smart acquirers look for capabilities needed for long-term success.
In high-tech companies, these capabilities often depend on intellectual property and human capital. This means that managers need to assess the target's people and culture from the start of the merger process.
Then they need to create a transition strategy that is easy for people to understand and follow. They also need to ensure that people at Target have substantial incentives to stay.
The best acquirers take a technology-first approach to the due-diligence process, including their technology teams, early in the planning phase. That way, they can identify opportunities to meet their goals more quickly and gain bigger benefits from the deal.
Achieving a future-focused mindset is about keeping up to date with the world, anticipating obstacles, and planning. It also involves being able to recover from setbacks and make sure you can adapt to the changes that are coming your way.
In the fast-paced and unpredictable high-technology industry, capturing value often relies on creating innovative products, hiring creative people, and developing new product cycles faster than competitors can. To achieve this, acquirers must embrace the target's start-up mentality, retain talented employees, and keep development energies focused.
The best tech acquirers have a clear purpose and vision of what they want to achieve. They can then use that framework to develop a strategy and work towards it over time.
In high-tech acquisitions, integrating the new company can be a significant challenge. Successful acquirers focus on retaining key employees and making the transition smooth.
They also resist the temptation to cherry-pick engineering employees and scatter them throughout the organization, moves that undermine the expertise for which they were acquired. Cisco, for example, maintains the leader of the purchased company in the integration team and ensures he's involved with every step of the process.
The best acquirers use a hybrid approach to integrating a new company's business functions, bringing the support teams into their central equivalents and keeping the engineering teams in place. This buffering helps to prevent disruption to the base business and keeps development energies focused.
The most effective acquirers create repeatable processes, systems connections, and talent models that allow them to adapt their integration approach for each deal efficiently. They also have one eye constantly fixed on the critical sources of value and risk that can unlock growth, and they disproportionately invest in those areas.