Three Things to Know About M&As and Technology

Mergers and acquisitions are a key development technique for corporations — and we might even see an uptick in such exercise, given expectations of less-stringent antitrust regulation from the brand new U.S. administration. For technology-focused corporations, listed here are three findings from current educational analysis that ought to inform their leaders’ decision-making as they take into account M&A alternatives:

1. Mergers pushed by consolidation increase expertise deployment. Do mergers increase corporations’ technological progress? It is dependent upon the motives behind the merger, based on researchers. A examine of mergers within the U.S. telecommunications trade discovered that these pushed by consolidation and market exploitation motives have a optimistic impact on expertise deployment on the merging corporations. In distinction, mergers undertaken primarily for monetary motives, which is extra ceaselessly the case, have a detrimental impact on expertise deployment outcomes. Leaders who wish to preserve a aggressive edge in expertise may wish to take into account their causes for pursuing an M&A method.1

2. Nonexecutive worker possession influences M&A choices. “Acqui-hiring” is a typical technique tech corporations use to convey beneficial expertise into their organizations. Nevertheless it’s additionally frequent for key workers to depart an organization following a merger or acquisition, which may defeat the motive behind the transfer. This dynamic is what causes nonexecutive worker possession to play a big position within the goal choice course of for high-tech M&As. Firms with greater ranges of nonexecutive worker possession usually tend to be acquired as a result of workers with an possession stake within the newly shaped entity are much less motivated to depart. Moreover, nonexecutive worker possession can facilitate smoother integration processes, since workers usually tend to be aligned with the corporate’s targets and extra keen to help the merger.2

3. Distinctive expertise portfolios make corporations engaging acquisition targets. The chance of acquisition for corporations with the least-unique expertise portfolios is 7%, but it surely rises to twenty% for these with essentially the most distinctive expertise portfolios. These corporations are particularly engaging to shut rivals inside the identical product market segments, provided that buying them might help scale back aggressive threats and strengthen market place. Moreover, these buying corporations are higher geared up to grasp, worth, and combine the distinctive expertise.