{"id":32005,"date":"2016-03-31T19:27:01","date_gmt":"2016-04-01T00:27:01","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/mergers-amp-acquisitions-a-strategy-for-high-technology.html"},"modified":"2016-05-26T07:26:57","modified_gmt":"2016-05-26T12:26:57","slug":"mergers-amp-acquisitions-a-strategy-for-high-technology","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/corporate-governance\/mergers-amp-acquisitions-a-strategy-for-high-technology.html","title":{"rendered":"Mergers & Acquisitions: A Strategy for High Technology Companies"},"content":{"rendered":"
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In the tech industry, there are two types of companies: the start-ups and the established corporations. While on rare occasions the start-up morphs into a well established tech powerhouse, more commonly the big fish ends up swallowing the smaller fish through an acquisition<\/a>. Whether or not an acquisition is fruitful is a tough decision that both sides will need to analyze.<\/p>\n

The reasons in favor of an acquisition can vary. Start-ups might agree to an acquisition because it provides an avenue to complementary products and markets. Or because it provides it with working capital, faster access to an established infrastructure, and faster return on investment. The established corporations might see an acquisition as a way to acquire a new distribution channel or key technology. Or it might think that an acquisition is a way to get rid of a competitor and gain creative talent.<\/p>\n

Whichever way you want to split it, the most common reason why an acquisition is desirable to either side is that it can add money to the bottom line. Figuring out if value is created or destroyed through an acquisition can be the toughest part that both companies need to decipher.<\/p>\n

Deciding to Be Acquired<\/b><\/p>\n

There comes a time in a successful start-up\u2019s life when a decision must be made to either be acquired or to go public with an IPO<\/a>. Although going public can be an exciting moment for any small company, start-ups must understand that there are many factors that need to be considered which may affect its decision. Things like the cost of making a public offering, public disclosure of finances, and the effort required to establish an infrastructure that will keep an attractive stock price need to be fleshed out before pulling the trigger on going public.<\/p>\n

If a start-up decides that going public is not in its best interest, then acquisition might be the better option. But, as a start-up<\/a>, when is a good time to begin thinking about acquisition?<\/p>\n

Start-ups may want to consider being acquired once they produce a product or service that is critically acclaimed in the industry, have a strong development team in a mission-critical area, have few conflicting or overlapping products or infrastructure, and are profitable and can demonstrate revenue and profit growth. This can occur quite early in the lifespan of a start-up. Being able to spot that an acquisition is in the company\u2019s best long-term interest may allow the company to sign the most lucrative deal possible.<\/p>\n

Key Deal Issues<\/b><\/p>\n

Once a start-up decides that an acquisition will be beneficial, the negotiating<\/a> and book checking begins. If the well-established corporation and the start-up agree that the two companies are a good fit, the terms of the merger must be determined. During this time, there are several key deal issues that need to be considered. Some of these issues are:<\/p>\n