Despite the war in Ukraine, accelerating inflation and increasing interest rates, the technology sector is still witnessing mergers and acquisitions in the United States. In the first half of 2022, major tech M&A deals included Microsoft’s $69 billion acquisition of Activision Blizzard, Mandiant’s $5.4 billion purchase of Google, and Elon Musk’s $44 billion bid for Twitter.
Private equity has also been active in the tech sector, with Toma Bravo buying SailPoint for $6.9 billion and Vista Equity Partners acquiring Citrix for $13 billion. Cross-border technology mergers and acquisitions include Deutsche Telekom’s $2.4 billion acquisition of SoftBank Group and T-Mobile US and its $1.8 billion acquisition of Siemens Brightly Software.
European and Asian companies can compete effectively with both US companies and private equity by offering greater accountability to the target’s post-transaction management, flexible transaction structures and global distribution of the target’s products sold with the acquirer’s sales force . By understanding the key issues in cross-border technology mergers and acquisitions, an international acquirer can close a successful deal and achieve its commercial goals in the United States.
Management teams, boards and shareholders have had time to adjust to the decline in valuations and will be more amenable to acquisitions at a reasonable price.
Before approaching targets, it is important to establish detailed acquisition criteria.
Acquisition criteria may include sub-sector, product mix, revenue, profitability and customer profile. It should also include more intangible aspects such as vision, culture and strategy. The strength of the management team is also important, especially if the international acquirer follows private equity rules and acquires a platform company with the intention of later acquiring smaller additional companies. Finally, there are practical criteria to consider, such as geographic location – if the international acquirer is in Paris, the flight to the East Coast is much shorter than the flight to California.
Once the acquisition criteria are established, a thorough target study is required. This research should include target funding, 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 at other companies in the subsector and industry trade groups. This industry insider knowledge can be very powerful.