Last year was arguably the year of mergers and acquisitions in the tech world, with the value of tech deals reaching a whopping $450 billion in all. And half of dealmakers still expect spending to grow in 2016 — a prediction that seems plausible considering the lack of tech IPOs in the first quarter (read: none).
So for leaders of tech companies looking for a buyout, it's time to prepare.
The Making of a Killer Buyout Strategy
It's no good seeking a buyout at the expense of users. The right combination of tech and passion has a multiplier effect in which it's the best thing for advancing the field and ultimately helping users.
A successful acquisition is a 1+1=3 strategy: one company is chocolate, one is peanut butter and together they make a killer dessert.
Making that dessert can result in plenty of cooks in the kitchen, and with so many considerations — cultural, legal and many more — one important thing can often get left on the backburner: the very technology your company was built on.
Selling your company shouldn’t mark the end of the technology you’ve worked hard to turn into a viable product.
With that in mind, here are three steps to make sure your startup’s technology provides value to the company acquiring it.
1. Assess the Timeline
One of the best ways to ensure your technology will have a long shelf life at its new parent company is to find a situation where it’s being applied to a newly launched product. I went through this process as the CEO of Infoactive, which Tableau acquired last year. Tableau was in the midst of building its iPad app, Vizable. So while Tableau shut down Infoactive as a standalone company as a result of the acquisition, it folded Infoactive into what was essentially an early-stage startup within Tableau.
That timeline offered a larger window of opportunity for our technology to be integrated and impactful‚ especially since our product and the new product had similar target markets and goals. We saw Vizable in its infancy before launch, understood the future product vision, and could really see how Infoactive would fit into the product strategy.
The takeaway: Understand not just what product your technology is being eyed for, but how far along that product is.
2. Mind the Gap
Along the same lines, have a clear understanding of how the acquiring company will apply the technology — namely, be able to identify exactly what problem your technology is solving. If you can’t identify a gap that’s being bridged with the buyout, there’s a good chance your technology will get lost in the shuffle.
In the case of my company's buyout, the target markets were similar, but there was one key difference: Infoactive was primarily a web platform. As a result, we brought web technology and skills that the product didn’t already have and that were appealing with regards to its potential growth.
Put another way, make sure your technology isn’t just offering more of the same.
3. Analyze the Track Record
One of the best ways to gauge what and how a company is going to do in the future, though, is to study what they’ve done in the past. In this case, do your due diligence researching the company’s past acquisitions and past product launches.
As you’re in talks, ask various executives not just what products they launched in the past, but what they thought about them. Did they think they were successful? Why? How? This will give you a better sense of the timeline and integration process.
Even better, do your homework and actually talk to the company's other acquisition targets. If the company has done lots of the acquisitions, you should be get a good sense not just about process, but about the post-acquisition application of technology and personnel. If the company hasn’t done a lot of acquisitions, there are pros and cons. Con: You don’t have any clues as to their normal approach. Pro: You may have more of a chance to shape the process.
As with so many things, the key to making sure your technology meets its full potential following an acquisition is to do your homework. Ask the tough questions, understand the timeline and value add, and you'll be well on the way to ensuring technology is the key ingredient in the decadent dessert created.
Title image by Saulo Mohana
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