Silicon Valley Entrepreneurs: Why Should Companies Merge?

What can enterprises learn from those failed M & A cases? The answer is that mergers and acquisitions usually involve two integration strategies, and which strategy should be adopted depends on which stage the acquired startups are in the life cycle.

　　 Innovation Portfolio

Most big companies manage three kinds of innovations, namely, technological innovation (making existing products better), continuous innovation (innovation in the existing business models of the company, creating new elements) and radical innovation (products or services that did not exist before development).

Those companies use innovation portfolios to manage these three innovations, either internal innovation, acquisition or cooperation with resources outside the company.

　　 Five categories involving acquisitions innovate

If they decide to buy, large companies can: 1, purchase intellectual property rights; 2, acquire start-ups to acquire the latter's R & D team and abandon their products; 3, acquire products from another company in order to acquire products; 4, acquire a company to acquire products and users; 5, acquire a company for performance.

　　 Silicon Valley -- the cradle of enterprise innovation

The business development and strategic cooperation of the business executives are heading for Silicon Valley in an effort to find the 5 kinds of innovations mentioned above. For this reason, many Vc firm, such as Sequoia Capital and Anderson Horowitz, are constantly recruiting new partners to cooperate with start-ups they invest in. Every year and every quarter, they actively organize activities to bring together decision-makers from Fortune 500 companies to facilitate investment or acquisition of start-ups.

Vc firm is very happy to facilitate takeovers, just as they would like to see their investment company IPO listed, because the price paid for acquiring a company is usually higher than the current value of the acquired company. For the acquirers, this is also significant because they integrate the start-up companies with their existing businesses, and then calculate the potential impact of start-ups. However, these valuations will make it more important to correctly integrate the acquired companies. One mistake usually made by the acquirers is to treat every purchase transaction in a uniform manner.

　　 Is the purpose of potential acquisition search or execution?

Not all start-ups are at the same stage of maturity. Remember, startups are defined as temporary institutions used to search for repeatable and adjustable business models. (business mode is the strategy that provides customers with products and profits. This includes products, customers, distribution channels, revenue models, how to acquire, retain and develop customers, establish the resources and activities needed for business and cost. )

　　 Start-up company Those companies that are still looking for business models. If a company has been developing for a long time and is implementing its business model, it will no longer be a start-up company, but a company in its early stages of development. Big companies are flocking to Silicon Valley to look for takeover targets, both for start-ups and for companies that are already in their early stages of development.

When evaluating the rationality of a takeover transaction, large companies often forget that start-ups are run by founders who are looking for business models. The founders are trying to find the right combination of products, markets, revenues and costs. They achieve this goal through a continuous customer discovery mechanism.

The stage of a new company is chaotic and unpredictable. At this stage, the ultimate goal of the start-up management is to identify the product / market fit and the business model that can be adjusted. This search phase is driven by the start-up culture, and the initiative culture encourages individual initiative and autonomy, and they create a team spirit characterized by sharing. The latter will lead to enthusiasm and tireless pursuit of opportunities by management. This is the process, procurement and rules required to constitute a large company.

On the contrary, companies already in the early stages of development are in the implementation stage, adjusting their organizational structure and customer base. Although they still have the enthusiasm of start-up companies, the goal is scale. Because of the need for restructured processes and procurement models to adjust the scale and implementation, these companies have begun to use the organizational chart, human resources manual, revenue plan, budget and key performance indicators to rectify the early chaos.

As part of the takeover transaction, the founders of start-ups may also join the acquirers, who usually assign a business specialist to be the CEO.

　　 Predict one item Buy Success or failure of trading

So what? Who cares if potential buyers are looking for business models or implementing their strategies?

Ironically, executives in business development and strategic cooperation are not executives in charge of integration or acquisition. Usually its fate is determined by the chief technology officer or business executive of the acquirer.

The success of a takeover depends on whether the acquirer intends to allow the newly acquired company to integrate its newly acquired company into its own business in an independent way.

In fact, before making this decision, there is a simple criterion for judging. If a startup is acquired because of its intellectual property and team, the right strategy is to integrate quickly and absorb it. What's left is indirect expenses around the core business of the company.

However, if a start-up is in search stage, and you want to get its products and users in order to make it develop at the current speed or even higher speed, and treat it as an independent department, then appoint the former chief executive of the start-up company as the head of the independent department. In view of the confusion of start-ups in this stage, the speed of innovation depends on retaining their culture, and corporate culture is driven by corporate autonomy.

Provide policy recommendations for existing CEOs, and use acquired company assets to accelerate development. The key is that for a start-up company that is still looking for the right business model, their business processes and policies will stifle innovation and let innovative employees leave the company before the advantage of the start-up company is realized.

If the acquisition is carried out in the form of execution, the correct approach is to integrate and absorb it. The key performance indicators, processes and processes of the two companies are integrated together. Unless the acquired company founder loves the original technology and process, he can be transferred to the enterprise innovation team.

　　 summary

1, enterprise acquirers must find out what they are buying. Is their acquisition goal in search of business mode or business mode?

2, if a startup is acquired because of its intellectual property, talent or income, it should be quickly integrated into the acquirer company.

3, if a startup is acquired because of its product or user, it can be retained as an independent department, which helps retain the culture of the start-up company. Assign a company's generalist to acquire the resources of the acquirer company; the incentive plan needs to be tied up with the newly acquired company.

4, the acquirers need a formal integration.