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ACQUIRING AN EXISTING COMPANY CAN BE FASTER THAN DEVELOPING NEW TECHNOLOGY FROM SCRATCH.
M ergers and acquisitions( M & A) are strategic moves that organisations undertake to enhance their market position, expand their capabilities or achieve growth. In the technology sector, mergers can be particularly impactful due to the rapid pace of innovation and the competitive landscape. If successful they can result in accelerated growth, improved financial performance and the opportunity to expand further into existing markets and access to opportunities in new target markets. However, if they do not achieve the expected results, organisations which adopt this strategy could find themselves facing integration issues, regulatory hurdles which can take time to resolve and dilution of focus on the core business if things do not go to plan.
From my experience in the technology sector the approach to mergers involves four key steps:
1. Strategic planning – Companies must identify their long-term goals and how a merger aligns with these goals
2. Target identification – Finding the right company to merge with is crucial. This involves thorough research and due diligence
3. Integration planning – Post-merger integration is critical to realising the benefits of the merger
4. Ongoing cultural integration – Once the merger plan has been implemented, you then need to continuously monitor that a‘ one company culture’ has been adopted
For technology businesses, deciding whether to buy( acquire) or build( develop internally) is a pivotal decision that can significantly impact their growth trajectory. Here are some considerations to help determine the right approach:
When to Buy
1. Speed to market – Acquiring an existing company can be faster than developing new technology from scratch
2. Access to expertise – Buying a company can provide immediate access to specialised knowledge and skills that may be difficult to develop internally
3. Market position – Acquisitions can help quickly enhance market position by eliminating competitors or gaining access to established customer bases
4. Risk mitigation – Developing new technology internally can be risky and uncertain. Acquiring a company with proven technology can reduce development risks and provide a more predictable path to success
When to build
1. Control and customisation – Building technology internally allows for greater control over the development process and customisation to meet specific business needs
2. Cost considerations – While acquisitions can be expensive, building internally might be more cost-effective in the long run
3. Cultural fit – Integrating an acquired company can be challenging due to differences in corporate culture. Building internally avoids these integration issues
4. Innovation and IP – Developing technology internally can foster innovation and result in proprietary intellectual property that provides a competitive advantage
The decision to buy or build in the technology sector depends on various factors, including strategic goals, market conditions, available resources and risk tolerance. Companies must carefully evaluate their options, considering both the immediate and long-term implications of their choice.
GLEN WILLIAMS, CEO, CYBERFORT
22 Intelligent SME. tech