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High Tech Acquisitions - Is It A Great Idea Or Simply A Bad Plan?
I was reading lately about the proposed merger between Storage Tek and Sun. Two main technology corporations, one making a comeback out of bankruptcy and the other stuck in a long slump, with several years of negative predictions about their business prospects.
I don't have sufficient solid information on the situation to decide whether or not it is a good idea from a strategic point of view or not. What I do know is that it probably will fail.
If you're in a similar scenario and are searching for bankruptcy services, consult a professional. There are numerous ways an acquisition can turn out horribly. Do not let this be you and your business.
Product Integration: A software company "takes out" a competitor. They then spend the next five years attempting to integrate the two code bases. Or they stop one of the products, alienating the user base they recently acquired.
Overlapping Brand names: The HP-Compaq merger can be a great example. HP paid a huge price for Compaq, and much of the value was in the Compaq brand. Did they need to have another brand and what have they accomplished with it since the merger? This caused confusion as well as duplicitous expenditures.
Dueling Managements: This ends in an internal "struggle to the death" for power over the business for the next year or two, while the remaining competitors run past.
Channel Conflict: Maybe both organizations have massive dealer networks having a lot of overlap. These issues could be a few of the toughest to manage. If completed poorly it is going to lead to large, sudden revenue reductions.
Exit Strategy for the Target: If the acquired organization views the deal primarily as a chance to "cash out", there will probably be a mass exodus of key individuals, persons that you simply need to have for the acquisition to make sense.
I hope that this doesn't come off as extremely negative. It's only meant to caution. There are plenty of excellent scenarios that can lead to prosperous acquisitions.
Software businesses who look to buy to fill a hole in their product collection or acquire technology to rapidly jump on an emerging market segment, as an example. These types of offers can make tremendous sense, if executed effectively.
Once your problem has settled, consider investing in over-the-counter stocks like pink sheet stocks by browsing: nyse arca.
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