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Acquiring companies in a digitalized world

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Acquiring companies in a digitalized world

  1. 1. © 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
  2. 2. Agenda Agenda • What is the difference between the software industry and other industries • Software acquisitions: Challenges and failures • Successful Technology due diligence © Dr. Karl Popp
  3. 3. What is the difference between software and other industries? © Dr. Karl Popp
  4. 4. 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
  5. 5. 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
  6. 6. Software acquisitions: challenges and failures © Dr. Karl Popp
  7. 7. 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
  8. 8. 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
  9. 9. How to avoid failure: Let others go 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
  10. 10. Successful technology due diligence © Dr. Karl Popp
  11. 11. Specifics of due diligence in the software industry Type of Due Diligence © Dr. Karl Popp 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
  12. 12. Successful technology due diligence: my key 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
  13. 13. 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
  14. 14. © Dr. Karl Popp More information here: http://www.mergerduediligence.com

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