M&A, Business Models and Ecosystems in the Software Industry

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Software strategy selection: is build, buy, partner sufficient or do we have to add open source to the game?

Strategy selection

The best innovation and growth strategy is to combine organic and inorganic growth. SAP has successfully applied organic innovation and growth resulting e.g. in SAP HANA, SAP S/4 HANA as well as inorganic innovation and growth via acquisitions like Qualtrics and Calliduscloud. 

Build, buy, partner

  For me, the most important distinction between build or buy is the window  of opportunity that you have.  In technology markets, there are frequent changes of market direction. If you’re lucky, you had started  your solution  in time to build something that is en vogue  right now. But if you’re not lucky, you need to acquire capabilities that the market needs today.  But is this the only option you have?

Opportunity and risk in building  and acquiring solutions

To be frank,    with the current state of technology due diligence on to be acquired companies there is no difference in risk to build or to buy.  When building products, you trust your developers to build something great. The a priori likelihood of success is 50%. Same likelihood applies for acquiring technology. In addition, acquired technology exists, has customers, success and failure history. So, what is the impact of this statement on build decisions? 

Build decisions

Build decisions are made based on anticipated market trends. So don´t be suprised when you find out that you made the wrong decision. It is perfectly natural to take wrong decisions. But how can you fix such a wrong decision? I have two proposals: The first one is to start massive marketing to convince customers and markets that what you built is the right thing. Tough. The second option is to buy your way into front and center of the market.  What are these the only options you have?

 Outsource your worries

 What we need to look at is in another alternative.  You could leverage an existing open source solution with a license that permits commercial use to jumpstart your building efforts.   And you build differentiating, proprietary technology on top.

 If the open source community behind that solution is being active enough, you will save massive effort for support and maintenance of the solution.  

It also makes financial  and strategic sense to spend your money wisely on functionality where you can differentiate your offering from the competitors’ offerings.

Why don´t you choose one of the following topics to continue:

 

Merger integration success based on best practices

Merger integration success based on best practices

With all the mergers and acquisitions activity going on in the markets, it is paramount to perfectly manage the planned integration of targets into the acquiring company.

The integration strategy and the integration approach is different for each merger and each merger has different synergy objectives.

This page is meant to shed light on recent state of the art knowledge and business practices for post merger integration. It tries to structure the problem and thus to provide a way to find the best approach for post merger integration.

When to start with merger integration related tasks

We introduce merger integration due diligence as a new type of due diligence that arises from the objective “Maximize likelihood of integration success”. See the separate page for this topic.

The task of post merger integration

An important ingredient in acquisition strategy is how you integrate the acquired company. Let us describe the task of post merger integration with goals and objectives. You have to think well about goals and objectives, since these will define what is being done through merger integration.

The goal of post merger integration is to plan and execute the integration of two businesses. WIthin each business, there is an organization and there are many processes, which are to be aligned and/or integrated.

Objectives of the merger integration task are:

  • Maximize likelihood of integration success: each merger integration tries to reach successful completion meaning that there is no failure of the integration.

  • Continue target operations: in most cases, it is important to not interrupt the target operations with merger integration activities.

  • Fit integration type: there are different ways to integrate two companies, which are determined in the integration strategy. more information about merger integration types can be found here: Merger Integration Types

  • Fulfill synergy objectives: every merger has synergy expectations and objectives. Merger integration is targeted at creating such synergies.

Decomposition of the merger integration task

There are three subtasks: designing the new entity, planning merger integration (project) and executing merger integration project.
The first two should be started during due diligence to ensure merger integration success.


MergerIntegrationTaskDecomposition.png

The four Merger Integration Types

In the high level model below, you end up with four generic types of post merger integration:

  1. Preservation: The target company is preserved meaning that you leave the target company autonomous. Nevertheless, integration of financial reporting and financial processes might make sense.

  2. Holding: The acquiring company just keeps the ownership of the target company, but does not integrate the target company.

  3. Symbiosis: In this merger type, you decide where integration is needed to reach the objectives of the merger integration.

  4. Absorption: the acquiring company fully absorbs the target company. All organizations and processes of the target company are to be fully integrated into the acquiring company.

integrationtype.png

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