For big companies, acquiring smaller ones may be considered the best investment decision they make. There are many benefits involved in such acquisitions. Here are some of them.
1. Gaining new customers
By taking over smaller companies, large ones are able to expand their customer base. The current customers of the acquired company will be presented with the brand image of the new one. Visiting Charles E. Phillips website gives information on Oracle, the software enterprise giant, acquiring over 70 companies, which helped them to attain customers from different fields.
2. Adoption of new technology
Recently, Microsoft acquired a small 50-employee company known as PhoneFactor. They specialized in converting cell phones into password verification devices. This new authentication technology requires more than just the entering of a password to log in. An example is the two-step verification in Gmail. The acquisition will allow the technology to be implemented in the cloud applications of Microsoft such as Active Directory and Windows Azur.
This shows how larger companies are implementing new technology into their products and services without the need for innovation.
3. Gain intelligent staff
Some large companies benefit by gaining the ‘main man’ that worked at the acquired company. Apple acquired Particle recently, and the front end developer Lynn Collette became the UI engineer at Apple. Big companies are able to gain intelligent staff members this way.
4. More space
Through small acquisitions, large companies are able to expand their operations without searching for space. The smaller company is already going to have operations in multiple locations, which when acquired, comes under the operation of the big company. This gives them access to more location-based customers.
However, there are some risks involved as well. For example, the synergies of both the companies may not be able to combine. This may be due to structural and cultural differences that may not allow for efficient teamwork. There are reputation risks as well. For example, the company being acquired may have pending lawsuits.
Some tips for large companies
1. Search for the right acquisition
Evaluate the knowledge you have about the company you’re planning to acquire. It may not work out if you don’t have a clue about the other company. The company you buy must match with your vision and philosophy.
2. Aim for synergy
Large companies can afford to take risks as they have a good budget for investment. However, to increase the chances for the investment paying off, they should look to add synergy in important areas. The acquisition should complement the existing cash flow for additional projects.
3. Look at the identity
Every company builds its image overtime. When acquiring a small company, the reputation has of that company needs to be taken into account.
4. Look at the culture
The other company may have a totally different way of doing things, and the working culture has to be considered. There should be room for co-ordination and adaptation in order to make an acquisition successful.
Acquisitions, if done properly, can greatly benefit a company.
Tags: business acquisitions