despite the war In Ukraine, amid accelerating inflation and rising interest rates, the tech sector is still undergoing mergers and acquisitions in the United States. In the first half of 2022, large tech M&A deals included Microsoft’s $69 billion acquisition of Activision Blizzard, Google’s $5.4 billion acquisition of Mandiant, and Elon Musk’s $44 billion bid for Twitter.
Private equity is also active in tech, with Thoma Bravo acquiring SailPoint for $6.9 billion and Vista Equity Partners acquiring Citrix for $13 billion. Cross-border tech mergers include Deutsche Telekom’s $2.4 billion acquisition of SoftBank Group and T-Mobile US, and Siemens’ $1.8 billion acquisition of Brightly Software.
European and Asian companies can effectively compete with U.S. companies and private equity firms by offering greater responsibility for target management post-deal, flexible deal structures, and global distribution of sales of target products with the acquirer’s sales force. By understanding the key issues of cross-border technology M&A, international acquirers can successfully complete transactions and achieve their U.S. business goals.
Management teams, boards and shareholders have had time to adjust to the drop in valuations and will be more willing to make acquisitions at reasonable prices.
Before approaching a target, it is important to establish detailed acquisition criteria.
Acquisition criteria can include sub-industry, product mix, revenue, profitability, and customer profiles. It should also include more intangible aspects such as vision, culture and strategy. The strength of the management team is also important, especially if an international acquirer follows a private equity strategy and acquires a platform company with the intention of acquiring smaller add-on companies later. Finally, practical criteria, such as geographic location, should be considered – if the international acquirer is in Paris, the flight to the East Coast is much shorter than the flight to California.
Once acquisition criteria are determined, in-depth target research is required. This research should include targeted financing, capital structure, leadership and industry reputation. Research should include databases such as Capital IQ, PitchBook, and Crunchbase, as well as confidential discussions with industry leaders from other companies and industry trade groups in the sub-sector. This industry insider knowledge can be very powerful.