A tech business acquisition is a huge feat, whether you acquire a company or one takes over yours. This can be an exciting time for both organizations. However, it is quite challenging to implement technology-related changes. While many difficulties may occur for both parties, incorporating the right strategies will ensure a smooth transition.
What Is a Tech Business Acquisition?
A tech business acquisition is when one company buys another’s shares to obtain control over it. Acquisitions typically happen when a bigger business wants to grow, especially when it wants to expand its tech skills and services. It may purchase a smaller operation with the technology or expertise it needs. This way, it can offer better or new tech products or services.
One primary example is Google’s (News - Alert) acquisition of Fitbit. In 2021, Google completed its acquisition of Fitbit for $2.1 billion so the tech giant could start offering its own health-tracking wearables. Acquisitions occur frequently — the process helps companies stay ahead in the technology industry since it’s always changing and growing.
What Is Involved in a Tech Business Acquisition?
Tech business acquisitions involve several steps for a successful transaction. Initially, there is the negotiation phase. This is where the buying and selling parties discuss terms like the price and conditions of the sale. This stage often involves intense bargaining and requires a deep understanding of the value of the company’s assets and potential.
Next, the buyer conducts due diligence. This includes examining the company’s financial records, legal matters and more, including a detailed background check. Once this is complete, legal documents are drafted to outline the responsibilities of each party.
After the deal is finalized, payments are made according to the agreed terms, which could be cash, stocks or a combination of both. The ownership of the tech company’s assets — including the intellectual property, technology, customer base and employees — is then transferred to the acquiring business. This phase marks the completion of the transaction and the start of integrating the acquired company into the buyer’s operations.
Why Do Tech Companies Acquire Other Companies?
Tech companies acquire other companies for several strategic reasons:
The tech industry constantly innovates, making this a compelling reason to acquire another company. Acquisitions give you immediate access to new technologies and markets, often more cost-effective than developing the same capabilities in-house.
Ways to Ensure a Smooth Acquisition for Your Tech Company
If you plan to acquire another company, implementing a few strategies can ensure it goes smoothly.
1. Prioritize Due Diligence
Conducting due diligence is crucial for a smooth acquisition process, as it gives you an idea of what challenges to expect. Start by assembling a team that includes financial analysts, legal experts and industry specialists. This team should review the tech company’s financial records, legal contracts and patents.
Also, assessing the company culture and employee satisfaction is key since they can impact post-acquisition integration. Focus on identifying potential risks or liabilities early in the process. Thorough due diligence will minimize surprises after the acquisition.
2. Conduct a Cultural Fit Assessment
A smooth tech business acquisition comes down to the culture of the companies merging. Conducting a cultural fit assessment will tell you how well they will mesh. This involves learning about the values, work style and communication methods.
Talk with leadership and employees and review internal communications and feedback. It is also beneficial to compare both companies’ approaches to innovation and handling change. A good culture fit leads to a balanced integration, boosting worker morale and retention and paving the way for a successful acquisition.
3. Maintain Open and Clear Communication
One key to a successful tech business acquisition is being upfront and honest. It is important to keep all stakeholders informed, as it maintains a better relationship. Transparent communication helps manage expectations, reduce uncertainty and foster trust. Therefore, your company must provide updates about the progress. Discuss plans for integration and how it will impact each group, whether good or bad. Sharing information and imperfections is vital for a good transition.
4. Develop a Detailed Integration Plan
Companies need a plan of action to streamline the transition and reduce operational disruption. A well-structured plan should outline how to combine the two companies’ operations, technology and cultures. The best way to start is by setting clear objectives and milestones for the integration process.
Assign roles and responsibilities from both sides to encourage teams to collaborate and share knowledge. The plan should cover all functional areas, including IT systems, human resources, finances and marketing. It is also important to be flexible, as your plan may need some adjustments throughout the process.
5. Retain Key Talent
Talented employees are the driving force behind a company’s success, and retaining them is crucial. Increase your chances by identifying key workers and understanding their roles and impact on the company. Then, meet with them early in the acquisition process to learn more about their investments in the new company.
Ensure you communicate their importance and provide reassurances about job security and career opportunities. Offer incentives such as bonuses and career development plans. Approximately 63% of employees leave their employer due to low wages and benefits. However, providing an irresistible offer can be an effective way to keep them motivated and on board.
Implement Key Tactics for a Successful Tech Business Acquisition
A successful tech business acquisition happens when you plan strategically and execute thoughtfully. However, the process is complex. Things change and unexpected challenges can arise, even with the best-laid plans. Therefore, it is essential to remain adaptable and adjust strategies as needed. With good preparation and adaptability, you can secure a strong future for your company through a successful integration.
Eleanor Hecks is the managing editor at Designerly. She’s also a mobile app designer with a focus on UI. Connect with her about digital marketing, UX and/or tea on LinkedIn.