© Dr. Karl Popp Acquiring companies in a digitalized world Dr. Karl Popp Follow me @karl_popp.
Acquiring companies in a digitalized world
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Transcript of Acquiring companies in a digitalized world
© Dr. Karl Popp
Acquiring companies
in a digitalized world
Dr. Karl Popp
http://www.drkarlpopp.com
http://www.mergerduediligence.com
Follow me @karl_popp on twitter
© Dr. Karl Popp
Agenda
• What is the difference between the
software industry and other industries
• Software acquisitions: Challenges and
failures
• Successful Technology due diligence
Agenda
© Dr. Karl Popp
What is the difference between software andother industries?
© Dr. Karl Popp
Why do software companies acquire?
• To buy innovation
• To speed up time to market
• To grow the marketshare in new markets
• To consolidate
© Dr. Karl Popp
Specifics of the software industry
• Companies
– Specific business models, e.g. freemium or cloud subscription
– International setup, even in small companies
– Average lifespan 12 years
• Products
– Very high speed of innovation, high frequency of product
deliveries
– Short product lifecycles
– Free components speed up innovation
• Ecosystems are key
– Platforms and ecosystems
– High switching cost for customers
• Intellectual property is front and center topic
© Dr. Karl Popp
Software acquisitions: challenges and failures
© Dr. Karl Popp
Selected risks in software M&A
Strategy failure
– Technology: In fast moving markets: wrong technology
acquired
– Ecosystem failure (not existing, not taking off)
– Does market consolidation pay off long-term?
Product failure:
– Massive use of viral open source software in commercial
product
Financial failure:
– Due to fantasy in due diligence (never fall in love
with an acquisition)
– Underestimated cost, Litigation
© Dr. Karl Popp
Selected risks in software M&A
Management failure:
– Due to inexperienced management and missing
standardisation in M&A processes
– Underestimated efforts in post merger integration
People failure: people leave
– Wrong communication
– No joint vision, mission and missing explanation what
the acquisition means for each employee
© Dr. Karl Popp
How to avoid failure: Let othersgo through hell for you
What?
– WYSIATI what you see is all there is
– you don´t foresee what you don´t know
Why?
– Avoid disaster
How do we manage it?
– Read the book
„Deals from hell“
by Robert F. Bruner
© Dr. Karl Popp
Successful technology due diligence
© Dr. Karl Popp
Specifics of due diligence in the softwareindustry
Type of Due
Diligence
Distinctiveness of the software industry
Strategic due
diligence
High volatility. high impact of platform strategies and partner
ecosystems on success
Market due
diligence
High market size volatility
High likelihood of disruptions in markets
Commercial due
diligence
Diversity of business models, revenue models and their combinations
Technology due
diligence
Distinctiveness and high change rate of software platforms and other
technology, use of third party and open source software, security
vulnerabilities, compliance with corporate quality standards
Human resources
due diligence
High importance of workforce quality due to low automation in
production, identifying and keeping key players
Cultural due
diligence
Software industry raises high employee expectations in culture,
benefits and work environment
Intellectual
property due
diligence
Increased importance due to strong role of IP
Patents, Open source, Third party products
© Dr. Karl Popp
Successful technology due diligence: mykey points
• The product
– Check the product and its architecture
– Discuss and plan integration with acquirer´s products
– Check and plan efforts for compliance with corp.
standards
– Check use of open source and third party products and
license compatibility with future business models
• Other topics worth mentioning
– Globalization and localization of target solutions might be
a high effort activity
– Mind the export restrictions to and from Europe,US
– Data protection laws in Europe
© Dr. Karl Popp
Results: Ingredients for success
• Analyze and adapt your capability maturity to
integrate successfully
• Structure and tailor integration approach and
M&A process
• Avoid deals from hell
• Manage complexity and effort
• Blueprint
© Dr. Karl Popp
More information here:
http://www.mergerduediligence.com
