Issues in Technology Company Mergers & Acquisitons

This article by Jaqueline A. Daunt provides an excellent overview of the issues facing technology companies that are either looking at being aquired as an exit strategy or are seeking to grow through acquistions, stating:

"A recent survey showed that between two and five emerging technology companies (TechCos) are acquired for every one that does an initial public offering (IPO). Acquisitions can provide strategic, operating and financial benefits to both TechCo and the company acquiring it (LargeCo). A strategic acquisition can provide TechCo's shareholders with earlier liquidity than an IPO, with less risk and dilution. It also can provide TechCo with the immediate leverage of LargeCo's established manufacturing or distribution infrastructure, without the dilution, time and risk of internal development.

A strategic acquisition can provide LargeCo with the new products and technologies necessary to maintain its competitive advantage, growth rate and profitability. Ill-conceived or badly done acquisitions, however, can result in expense and disruption to both businesses, the discontinuance of good technologies and products, employee dissatisfaction and defection, and poor operating results by the combined company. By understanding the key factors that lead to a successful acquisition, TechCo and LargeCo can improve the probability of achieving one."