First, a simple strategic framework. In a much longer post on this subject on my blog I highlighted some of the basic criteria by which an acquiring company is going to evaluate whether to make an acquisition, which I have summarized here. These are the questions a potential acquiring company is going to ask about each of its acquisition targets:
- Are you in the same core business?
- Do you fill a current market gap?
- Post-acquisition is integration going to be easy?
- As a software company, do you have good code?
- Do you have any skeletons hiding in the closet (also known as having your house in order)?
Now let’s walk through some examples of how these are applied. Keep in mind this is my opinion as opposed to fact as I am evaluating these from “outside the company”* and as such it is hard for me to comment extensively on ease of integration, quality of code and a lack of skeletons, but I’ll give it a shot.
Maktoob is/was the portal of the Middle East, acquired by Yahoo! in Aug 2009. This deal is relatively simple to understand (the good ones always are). From Yahoo!’s perspective the acquisition was to acquire and integrate a company that had essentially “copied” Yahoo’s portal model and localized it for the Middle East. All that was required was for Yahoo! to integrate Maktoob into its global sales network and product platform. But let’s analyze the deal using the framework:
- Core business: Both companies are portals with similar content products and advertising products – so they are in the same core business. They had very similar business process and functions (editorial, advertising sales, etc.), revenue sources, products and technology; all of which were well understood by Yahoo!
- Market gap: Yahoo! did not have a Middle Eastern site and likely did not have a dedicated Middle East sales force. Similarly, Maktoob likely did not have an international sales force (although both were most likely leveraging regional ad networks and agents). As such there was potential immediate upside as both companies could cross-sell and cross-promote each other’s content and products (such as introducing Yahoo! mail and messenger to Maktoob’s audience).
- Post-acquisition ease of integration: This I can only guess, but as Yahoo! had little presence in the region and both companies are in the same business, had similar internal processes and reporting needs, this was likely quite straightforward. Most of the Maktoob products and internal systems could be migrated to Yahoo!’s platforms and as Yahoo! did not have regional operations, support or product teams, few redundancies would likely be required and the original team could be kept together.
- Good code and minimal skeletons: Given the acquisition was completed, I can only assume that these measures passed muster.
My next post will look at McAfee’s acquisition of TenCube, a Singapore startup that makes the mobile security product WaveSecure.
* Disclaimer: Although I worked at Yahoo! when Yahoo! acquired Maktoob, I was not involved on the acquisition or integration team and do not have any inside information; my assessment is purely based on what I know from public resources. Likewise, for Wavesecure the acquisition sponsor at McAfee was my boss at Symantec, but I do not have any inside information on the acquisition, only public information
Patrick Williamson currently works as an independent consultant in the consumer Internet and in his spare time he advises startups. Previously he had built many partnerships working in business development at Yahoo! Southeast Asia in Singapore and as a global product manager for the Symantec consumer business unit in California. You can find additional information on this subject at more at his blog at his blog at PatrickSEA.com.
[Photo from Arabcrunch]
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