© 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
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 and other industries?
DIFF
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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
CompaniesSpecific business models, e.g. freemium or cloud subscription
International setup, even in small companies
Average lifespan 12 years
ProductsVery high speed of innovation, high frequency of product deliveries
Short product lifecycles
Free components speed up innovation
Ecosystems are keyPlatforms and ecosystems
High switching cost for customers
Intellectual property is front and center topic
© Dr. Karl Popp
Software acquisitions: challenges and failures
#fail
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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 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
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Successful technology due diligence
Due
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Specifics of due diligence in the software industry
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: 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
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