While it's true that M&A activity comes in cycles, the reasoning for those cycles can vary - as can the impact it has on business strategy, market forces, and even product marketing. As Jon Swartz's article in the USA Today (see link below) states, there is a big push of tech M&A activity happening right now, and signals indicate that this could continue for some time.
http://www.usatoday.com/story/tech/news/2016/08/08/merger-mania-all-rage-tech/87914908/
One could argue that it was kicked off a couple years ago, when Dell was taken private by Michael Dell and SilverLake Partners (and continues with its purchase of EMC). This begs thoughts on why industry players and financial buyers alike are looking to buy companies rather than focus on growing top-line and profits organically.
However, Swartz astutely notes that "this time there's a notable difference [about the M&A activity]... companies are being scooped up for billions instead of being shuttered." But why is this the case? Why are acquirers paying large sums and full valuations for companies both young and mature? One could point to an iffy IPO environment that makes a company sale a more viable alternative; but that still begs the question of what id motivating the buyers? In my view, there is a race to build capabilities and scale to help shore up strategic "moats" in a time when customer preferences and marketplace paradigms are shifting around a breakneck speed.
I see this race being driven by 2 key forces:
1. The need for tech brands to gain access to complementary product lines and services - preparing them for potential changes in market dynamics. Swartz alludes to this often, citing examples of Oracle and IBM needing to gain expertise in cloud-based computing (the opposite of their legacy product philosophies), and hardware companies moving into media content, tools, and services to make sure they provide end-to-end solutions for their customers.
2. The need to build scale on a global basis - accelerating the ability to acquire new customers (and the accompanying data), and to solidify brand engagement in a time when brand identities can drown in a sea of 24-hour media cycles and un-intended social media narratives. Talent acquisition also plays a role here. But this trend drives some smaller brands into the arms of financial buyers (i.e. private equity firms) if they feel that their ability to compete as a publicly scrutinized company is too challenging. Dell, Rackspace, and even Yahoo are examples of this.
As a business strategist and technology marketing, I find this trend to be not only interesting to follow, but also important to factor into business decision-making. With complimentary products being brought into the fold, its hugely impactful to market tech-infused brands as a solutions to the inevitable challenges that emerge in a constantly evolving world. Additionally, it underscores the need for marketers to understand the needs of and forge close relationships with their customers. Scaling a business through acquisitions can backfire on a company if their customers don't understand why it is happening and what is in it for them. When not integrated well, brands have created confusion and lost touch with their loyal customers along the way.
M&A always makes for exciting and intriguing news, and the current flurry of deals is no exception. But experienced leaders and strategists need to know the "why's" behind the what, and also know how to mitigate the potential pitfalls after the excitement when the dust settles.
http://www.usatoday.com/story/tech/news/2016/08/08/merger-mania-all-rage-tech/87914908/
One could argue that it was kicked off a couple years ago, when Dell was taken private by Michael Dell and SilverLake Partners (and continues with its purchase of EMC). This begs thoughts on why industry players and financial buyers alike are looking to buy companies rather than focus on growing top-line and profits organically.
However, Swartz astutely notes that "this time there's a notable difference [about the M&A activity]... companies are being scooped up for billions instead of being shuttered." But why is this the case? Why are acquirers paying large sums and full valuations for companies both young and mature? One could point to an iffy IPO environment that makes a company sale a more viable alternative; but that still begs the question of what id motivating the buyers? In my view, there is a race to build capabilities and scale to help shore up strategic "moats" in a time when customer preferences and marketplace paradigms are shifting around a breakneck speed.
I see this race being driven by 2 key forces:
1. The need for tech brands to gain access to complementary product lines and services - preparing them for potential changes in market dynamics. Swartz alludes to this often, citing examples of Oracle and IBM needing to gain expertise in cloud-based computing (the opposite of their legacy product philosophies), and hardware companies moving into media content, tools, and services to make sure they provide end-to-end solutions for their customers.
2. The need to build scale on a global basis - accelerating the ability to acquire new customers (and the accompanying data), and to solidify brand engagement in a time when brand identities can drown in a sea of 24-hour media cycles and un-intended social media narratives. Talent acquisition also plays a role here. But this trend drives some smaller brands into the arms of financial buyers (i.e. private equity firms) if they feel that their ability to compete as a publicly scrutinized company is too challenging. Dell, Rackspace, and even Yahoo are examples of this.
As a business strategist and technology marketing, I find this trend to be not only interesting to follow, but also important to factor into business decision-making. With complimentary products being brought into the fold, its hugely impactful to market tech-infused brands as a solutions to the inevitable challenges that emerge in a constantly evolving world. Additionally, it underscores the need for marketers to understand the needs of and forge close relationships with their customers. Scaling a business through acquisitions can backfire on a company if their customers don't understand why it is happening and what is in it for them. When not integrated well, brands have created confusion and lost touch with their loyal customers along the way.
M&A always makes for exciting and intriguing news, and the current flurry of deals is no exception. But experienced leaders and strategists need to know the "why's" behind the what, and also know how to mitigate the potential pitfalls after the excitement when the dust settles.
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