Techquisition - Don't Be Disrupted. Be Disruption.

2
Copyright © 2017 Aquaa Partners Limited.
All Rights Reserved.
Contents
1. DISRUPTION ABOUNDS - ALL COMPANIES
ARE “GOING TECH” 4
THE DISRUPTIVE PAST IS DEAD. LONG LIVE THE
DISRUPTIVE PAST. 6
M&A AS A STRATEGIC TOOL 9
TECHNOLOGY M&A GOES DEEP AND WIDE 10
2. FUNDAMENTAL DRIVERS OF
TECHNOLOGY COMPANY M&A 16
EXPONENTIAL CHANGE MEANS COMPANIES
AND THEIR PRODUCTS NEED TO CHANGE 22
3. HOW DO COMPANIES DEAL WITH
THESE DISRUPTIVE CHANGES? 26
“THIS IS A MOVEMENT” 29
M&A IS A SOLUTION – BUT THERE ARE BUMPS
IN THE ROAD 32
4. FIVE OF THE MOST COMMON MISTAKES
CORPORATES MAKE WHEN ACQUIRING A
TECHNOLOGY COMPANY 37
5. THE GOOD NEWS – THERE IS A SCIENCE TO
ACQUIRING A TECHNOLOGY COMPANY 43
“Neither RedBox nor Netflix are even on the
radar screen in terms of competition.”
– Blockbuster CEO Jim Keyes, speaking to the Motley Fool in 2008.

3
JPMorgan CEO Jamie Dimon opined plainly
in late 2015 that bitcoin will not survive:
“This is my personal opinion, there
will be no real, non-controlled
currency in the world,”
said Dimon.
“There is no government that’s
going to put up with it for long …
there will be no currency that gets
around government controls.”

4
DISRUPTION ABOUNDS - ALL
COMPANIES ARE “GOING TECH”
“(In 2016), the number of technology companies sold to non-
tech companies surpassed those acquired by tech companies for
the first time since the internet era began, according to data
compiled by Bloomberg. Excluding private equity buyers,
682 tech companies were purchased by a company in an
industry other than technology, while 655 were acquired by
tech companies.” – The New York Times, 2 Jan 2017
Increasingly, digital technology for companies is like water, air or
electricity – a company has to have it – just to survive.
Rob Carter, CIO, FedEx Corporation says “the digital revolution is
underway and survival requires way more than surface level tactics.”
However, survival isn’t enough. Technological advances are not
only speeding up, but they are speeding up exponentially.
Customers across the world today are demanding and expecting
more value, in the form of an outcome or experience, which tends
to contain the following elements:
a) a more advanced product / service / solution, that has
b) more features and benefits, which
c) costs less and
d) is simple to use and which
e) is available 24/7
f) in all aspects of their daily lives.
When the customer demands more, it doesn’t just affect pricing, or
product. It affects everything.
“We are a
technology
company”
– Goldman Sachs CEO,
Lloyd Blankfein
1.

5
Higher customer expectations affect every facet of the organisation
– R&D, production, operations, IT, sales and marketing, HR. No
department or business function is safe.
In a recent survey of 600 large-cap corporate executives from
around the world, EY reported that 90% of the executives surveyed
said their companies faced increased competition from businesses
that have already embraced digital technology1
.
As the WSJ recently reported, new venture capital arms of large
corporations seem to sprout up every few months, enabling their
executives to mingle and hunt for partnerships and acquisitions.
Entrants in 2016 included Campbell Soup Co., Kellogg Co., Jet-
Blue Airways Corp. and Airbus Group SE, the last two located in
Silicon Valley.2
1 EY, “Dealing in a digital world”, June 2016
2 The Wall Street Journal, 30 Dec 2016, “Old-Line Companies Like Wal-Mart and GM Acquire Taste for Tech
Start-Ups”

6
Gartner Fellow, Mark Raskino, says “every industry will be digitally
remastered.”
This “remastering” is already happening.
THE DISRUPTIVE PAST IS DEAD. LONG
LIVE THE DISRUPTIVE PAST.
Kodak was once the world’s largest film company, with 145,000
worldwide employees in the late 1980s, and generating nearly $16
billion annual revenue in 1996. It had a market cap of approxi-
mately $30 billion at its peak in 1997. “Kodak” was regularly rated
as one of the world’s five most valuable brands.
In 1976, more than 90% of photographic film and more than 85%
of cameras sold in the US were made by Kodak.3
But even this mightiest oak of oaks, Kodak, fell victim to technol-
ogy disruption. In 2011 its share price fell by more than 80% and,
in 2012, after 128 years of history, it filed for bankruptcy.
Steve Sasson, the Kodak engineer who invented the first digital
camera in 1975, characterized the initial corporate response to his
invention this way:
“But it was filmless photography, so management’s
reaction was, ‘that’s cute—but don’t tell anyone about it.’”
Kodak management’s inability to see digital photography as a dis-
ruptive technology, even as its researchers extended the boundaries
of the technology, would continue for decades. As late as 2007, a
Kodak marketing video felt the need to trumpet that “Kodak is
back “ and that Kodak “wasn’t going to play grab ass anymore”
with digital.4
If disruption can destroy Kodak, it can destroy anyone.
3 The Independent, “The moment it all went wrong for Kodak”, 20 Jan 2012 and The Economist, “The last
Kodak moment?” 14 Jan 2012
4 Forbes, “How Kodak Failed”, Chunka Mui, 18 Jan 2012
“Every discussion
we have now is
about technology”
– Deutsche Bank CEO,
John Cryan

7
Most executives are generally aware of the disruption that technol-
ogy has wielded over the past 15 years or so on so many traditional
industries such as music, newspapers, travel agencies, books, trans-
port and photographic film.
The already crippled industries who have been infected over so
many years by digital technology disruption continue to attract
wounds and battle scars.
For example, even in late 2016, after years and years of battering
from digital disruption such as online classifieds, newspaper com-
panies’ revenue continued to decline quite substantially.
A case in point is The Wall Street Journal, part of News Corp’s Dow
Jones division, which in in Q3 2016 suffered a 21% decline in ad
revenue.
The New York Times, Financial Times, Gannett (which owns USA
Today), and Tronc (which owns the LA Times and Chicago Tri-
bune), all suffered similar declines.
Gerry Baker, Editor-In-Chief of The Wall Street Journal, com-
mented in November 2016 on the continuing consequences of dis-
ruption from technology:
“The fall in advertising has been much faster
this year than anyone had expected.”5
Pearson, the multinational publishing and education company, has
faced a similar challenge from digital disruption. Revenues in Pear-
son’s US higher education division – which accounts for 60% of
profits and revenues – fell by 30% in Q4 2016.
When this news was announced on 18 Jan 2017 Pearson’s share
price fell 29% in one day.
However the disruption we have witnessed in these industries over
the past 15 years is not finished. Some would argue the disruption
is just getting started.
5 Financial Times, “Wall Street Journal slims to tackle falling ad sales”, 16 Nov 2016

8
From here it only gets worse – not only for the already disrupted
industries, but also for those industries that are about to get dis-
rupted, potentially even more painfully and swiftly than the indus-
tries that were vulnerable to disruption during the genesis of digital
technology 15 to 20 years ago.
As non-tech growth-focused companies now begin to feel the pres-
sure of digital disruption they are starting to see the inevitable real-
ity of their predicament.
The question is how does a growth-focused traditional company
build the capabilities required to create more value and guard
against disruption?
How does it keep up with continually rising customer expecta-
tions? How does it generate more revenue? How does it maintain
and increase its margins? How does it enhance the customer expe-
rience? How does it continually manage its operating costs down in
the face of ever-increasing globalisation?
Does a company need to build all these capabilities organically? Or
should it acquire them? Or both?
These are monumental challenges that companies face today. But
they can, and are, being met.
“A pessimist sees the difficulty in every opportunity; an optimist
sees the opportunity in every difficulty.” - Winston Churchill
Companies can take actions to future-proof themselves. If they are
bold and capable enough, they can even go from “disruptee” to
“disruptor”.
The most forward-thinking companies (think Netflix not Block-
buster), are making changes – they are becoming technology
companies.
It is not just the newspaper, books and music industries that are
being remastered by technological change. All industries are under
pressure.
“An iPhone
belongs in your
pocket, not on the
road,”
said Porsche CEO Oliver
Blume said.

9
For many companies devising technological solutions and digital
expertise and innovation in-house to combat the digital threat is
no longer enough.
Corporates are beginning to manage this disruptive change, to their
advantage, by acquiring technology companies.
M&A AS A STRATEGIC TOOL
The acquisition of the right technology company is becoming
increasingly important to the success of a traditional growth-fo-
cused company.
For much of the past 50 or 60 years, companies in industries rang-
ing from manufacturing to retail generally avoided high-tech, Sili-
con Valley-type “startups”, instead choosing to build their own new
products or buy established companies.
But a combination of factors—fear of seeing business disrupted,
struggles to find growth, changes that require new skills—are lead-
ing more of these more traditional companies to search for tech-
nology acquisitions.
Take the example of a traditional company that has successfully
navigated the choppy waters of technology company acquisitions –
Harman International Industries.
Harman, a traditional manufacturer of speakers and other audio
gear, announced in November 2016 that it is being acquired by
Samsung for $8 billion in an all-cash deal.
Why?
Because Harman, as a growth-focused company, created more
value and guarded against disruption by expanding over the past
several years into technology – specifically software development
and components for connected cars – such as WiFi connectivity
and navigation systems.

10
Harman created much of its well-directed growth and expansion
by acquiring tech companies, such as the $780m acquisition in
2015 of software-services company, Symphony Teleca Corp.
Simply put, Harman played to the future, not to where it was.
And what about Samsung itself? Harman is a rare large acquisi-
tion for the company, since Samsung has traditionally preferred to
develop technologies in-house. So why Harman and why now?
Cars are increasingly becoming “connected cars” and Samsung
views Harman as a connected car technology company. Samsung’s
strategy chief, Young Sohn, points out, “we think technology is
more critical than being in the metal-bending business.”6
John Casesa, who runs global strategy for Ford Motor Co. says
“we are in an era in our industry where M&A will be a frequently
used instrument.”7
(Ford recently acquired a San Francisco-based
startup commuter shuttle service called Chariot for $65m).
TECHNOLOGY M&A GOES DEEP AND WIDE
Exactly how widespread is M&A of technology companies being
used today as a tool for growth-focused companies to respond to
digital disruption?
EY states that more than 67% of global executives now plan to use
M&A to upgrade their digital capabilities in responding to height-
ened competition and a disruptive environment.
The chart below (from EY’s June 2016 “Dealing in a digital world”
study) shows that the 90% of executives who are concerned about
their competition having already embraced digital technology
believe that 62% of this competition have achieved their competi-
tive position via M&A or inorganic means.
6 WSJ, 15 Nov 2016, “Samsung Charges Into Auto Tech With $8 Billion Deal for Harman”
7 WSJ, 30 Dec 2016, “Old-Line Companies Like Wal-Mart and GM Acquire Taste for Tech Start-Ups”
“It’s our
recognition that
if you go to bed
as an industrial
company, you’re
going to wake
up as a software
and analytics
company. The
notion that there’s
a huge separation
between the
industrial world
and the world
of digitalization
– those days are
over…”
– Jeffrey Immelt,
Chairman and CEO, GE

11
Acquisitions of technology companies are impacting all elements of
acquirers’ businesses – logistics/supply chain, back office, inventory
management, cost of goods reduction, quality of goods enhance-
ment, big data customer analytics, new product extensions and
improvements, enhanced customer / user experience – this list goes
on and on.
BBVA, Mastercard and Boeing, for example, have made seven,
eight and 10 technology company acquisitions, respectively, since
2011 according to PwC.
In this time Siemens has acquired or invested in at least 26 technol-
ogy companies, GE at least 22.
Companies in non-digital industries completed 48% more tech-
nology company acquisitions in 2015 than they did in 2011.
Of the roughly 20,000 technology company acquisitions
announced between 2011 and 2015, about a third involved a non-
tech, non-telecom acquirer. (PwC)
The infographic below highlights the trend of “non-tech” compa-
nies acquiring “tech” companies as they, and their respective indus-
tries, go more and more tech.

12
“There is no reason
anyone would
want a computer
in their home,”
said Ken Olsen, founder
of Digital Equipment
Corporation, 1977.

13
A few of the more interesting technology company acquisi-
tions made by more traditional companies include the following
transactions:
„„ Samsung acquiring audio systems company,
Harman ($8b; Nov 2016)
„„ John Wiley & Sons acquiring SaaS content delivery to
publishers company, Atypon Systems ($120m; Aug 2016)
„„ Telus Health acquiring cloud-based EHR and PM solutions
company, Nightingale Informatix ($14m; Jul 2016)
„„ Mars Petcare acquiring dog fitness tracking
company, Whistle ($117m; Apr 2016)
„„ GM acquiring self-driving tech start-up,
Cruise Automation ($1b; Mar 2016)
„„ Adidas acquiring app tracking company,
Runtastic ($240m; Aug 2015)
„„ Hello Curry fast food chain acquiring software
company Fire42 (und; Jun 2015)
„„ Under Armour acquiring fitness and nutrition tracking
platform, MapMyFitness ($150m; Feb 2015)
„„ Harman acquiring software-services company,
Symphony Teleca ($780m; Jan 2015)
„„ Capital One acquiring user experience consultancy,
Adaptive Path (und; Oct 2014)
„„ Monsanto acquiring weather big data company,
Climate Corp. ($930m; Oct 2013)
Highlighted below in a map format are a few of the more interest-
ing technology company acquisitions executed by traditional com-
panies over the past few years:
“We don’t consider
customers cargo,”
said Jaguar’s head of
R&D, Wolfgang Epple,
in 2015.
“We don’t want
to build a robot
that delivers the
cargo from A to
B.”

14
From The Wall Street Journal, Dec. 30th
, 2016, “Old-Line Com-
panies Like Wal-Mart and GM AcquireTaste forTech Start-Ups”:
Scotts Miracle-Gro Co., the 148-year-old lawn-products com-
pany based outside Columbus, Ohio, wanted more tech-focused
products and gadgets to help with lawn care, but quickly realized
it would have to look outside its ranks for help, said Peter Su-
pron, the company’s chief of staff.
“To the best of our knowledge, we don’t have an electrical engi-
neer doing electrical engineering in the company,” he said.
After charting out the lawn-care startup landscape and many
flights to Southern California—where many are located—Scotts
bought two technology startups this month. One, called Blos-
som, helps make a digitally connected sprinkler system, and the
other, PlantLink, makes sensors that tell gardeners when to water.
Both are small acquisitions—under $10 million, Mr. Supron
said—but they saved Scotts the headache of building products
on its own.
“These startups can get there faster and cheaper than us,” he said.

“I personally don’t want my blood pressure
and blood sugar values stored in the
cloud, or on servers in Silicon Valley
… I cannot accept the responsibility of
whether my device warns a customer
in time before a heart attack.”
– Swatch executive Nick Hayek Jr.,
speaking to The Guardian

16
FUNDAMENTAL DRIVERS OF
TECHNOLOGY COMPANY M&A
To understand what is fundamentally driving this growing trend of
traditional companies acquiring technology companies, it helps to
go back in time to gain perspective on where we are today.
Twenty-five years ago there were no cellphones, digital music play-
ers, digital cameras, cloud computing, YouTube, iPhone, tablets,
Dropbox, Google, Facebook, texting, Siri, Instagram, Google
Maps, LinkedIn or augmented reality games. In fact, the “Internet”
and “email” were just in their infancy.
A kid in Africa with a cellphone today has more access to accurate
information than the President of the United States did 15 years
ago.
Within the last five years we’ve learned how to reprogram stem
cells to rebuild the hearts of heart attack victims. The stem cells are
harvested from skin cells, not human embryos.
Even investing has changed, quite dramatically.
Back in 1992, mutual funds charged about 8% sale commissions –
even on dividends reinvested in the fund – and annual expenses of
at least 1% of assets.
If you put $10,000 into a mutual fund then, only $9,200 would go
to work for you, and you would pay at least $100 a year in expenses
on that.
Today, you can buy exchange-traded funds, commission free, with
annual expenses as low as 0.03%. Invest $10,000 and $9,997 stays
in your own pocket. For small investors, the costs of buying and
selling individual stocks also have shrunk towards zero8
.
8 “Some of the Wisest Words Even Spoken About Investing”, Jason Zweig, The Wall Street Journal, 25
Nov 2016
These mobile
games are
“candidly
disposable from
a consumer
standpoint,”
said Nintendo president
Reggie Fils-Aime,
speaking
in 2011.
2.

17
And what about the next 10 years?
In the next 10 years, everything we know - and do - will change.
The ways in which we shop, work, sleep, eat, travel, communicate,
bank, entertain ourselves, conduct warfare, manufacture, design,
distribute, create, transact, and maintain our own health – will all
change. It will all be different9
.
For example, if we can turn off genes, then why not turn off the
ones in cancer cells that enable them to pursue unlimited repro-
duction, until they kill its host? That development would cure all
cancers, and is probably only a decade off10
.
Compared to the next 10 years, the advances we’ve seen in the last
25 years are just incremental improvements; just a foundation for
the revolution of exponential technology-based metamorphosis we
are about to experience.
Most of us are familiar with Sir Isaac Newton’s comment to scien-
tist Robert Hooke in 1675: “If I have seen further it is by standing
on ye shoulders of Giants.”
9 “Over the Next 10 Years Fortunes Will Be Made”, Bonner & Partners, 26 Nov 2016
10 Stocks to Buy for the Coming Roaring Twenties, John Thomas

18
But progress in science and innovation goes deeper.
Humans evolved to become linear thinking animals (eg we saw
gazelles running right to left and that’s where we threw the spear).
We tend to project and forecast growth and change at a linear rate.
But science / technology / innovation grows at an exponential rate.
The difference between linear and exponential is the difference
between night and day.
Exponential growth is just like compound interest.
“Compound interest is the eighth wonder of the
world. He who understands it, earns it ... he who
doesn’t ... pays it.” – Albert Einstein
Andy Kessler describes it well below (WSJ, 8 November 2016):
“In 1970, Intel pioneered integrated memory chips to replace
wire-wrapped diodes. The 3101 was a 64 bit SRAM chip
that IBM and others could buy for $40 each. Let’s call it a buck
a bit. Today…you’re carrying around an iPhone or Android
with at least 32 gigabytes of memory. At a buck a bit, that’s
. . . wow, congratulations! You’re a billionaire! We all are…
this is progress on steroids and is coming faster and faster…”
These exponential technological advances are speeding up custom-
ers’ expectations, which in turn are affecting consumer behaviours,
which in turn affect behaviour in the enterprise.
Whether we like it or not, our society is rapidly – exponentially –
advancing to a brave new “Westworld” singularity.
The problem with identifying an exponential change is that in the
early stages it looks the same as ordinary linear change.
As shown in the graphic below, exponential changes grow slowly in
the early stages. But when they reach a certain tipping point they
take off like a rocket.
“Microsoft will
roll [Salesforce]
over,”
Thomas Siebel of Siebel
Systems flatly told
Bloomberg in 2003.
“They get
Zambonied.”

19
Think about Apple. It enjoyed huge returns during the early years
of the computer revolution, and then held steady for several years.
Then, after the introduction of the iPhone in 2007, the share price
began to rise exponentially (see chart below).
The iPhone itself is several thousand times smaller, a million times
cheaper and a billion times more powerful than the computers of
40 years ago. Price per performance has increased by trillions.

20
This trend is speeding up.
In 1998, Google reached a $1 billion in market cap in only eight
years, which was considered fast back then. By 2004, Facebook had
done it in five years. By 2009, Uber had done it in less than three
years. In 2012, virtual-reality firm Oculus did it in just over a year.
And as recently as 2014, a workplace productivity company called
Slack pulled it off in eight months. (See chart below)11
.
Yes, market conditions, market cycles and hyped valuations can
muddy the “facts”. But the point remains clear – the pace of prog-
ress is accelerating.
Paradigm shifts occurred every 10 years in the past century, every
five years in the last decade, and will occur every few years in
the 2020s. Get ready for quantum computing and DNA-based
computing.
As Mark Raskino and Graham Waller of Gartner Group point out
in their book, Digital to the Core:
11 “Over the Next 10 Years Fortunes Will Be Made”, Bonner & Partners, 26 Nov 2016
“I think there is
a world market
for maybe five
computers,”
said Thomas Watson,
founder and president of
IBM, in 1943.

21
“Leaders from traditional industries should not
underestimate how fast the art of what is technically
possible can tip, nor its disruptive power. Sometimes the
change just ahead of you feels like science fiction.”
By 2020 super-computer capability (which surpasses human brain
computational ability) will be available on a low end laptop. By
2050, this single laptop will have the same computing power of the
entire human race, about 9 billion individuals. It will also be small
enough to implant in our brains.
Stock analysts, investors and many corporate senior executive deci-
sion makers make a fatal flaw in estimating future company earn-
ings based on linear trends of the past, instead of on the exceptional
exponential growth that will occur in the future.
Based on the growth of stock market indices of the last century
(eg the Dow rose from 100 to 10,000, an increase of 100x), the
current stock indices are actually currently lagging the historical
trend – the Dow is only up 3.2% a year in the last 16 years into the
new century.
After the next major market crash/correction, which we expect will
happen sometime during 2017-2019 (for further views on this
coming crash click here), the stock indices will play catch-up in
a major way during the 2020s, when economic growth begins to
accelerate (could be from 2% to 4-5% a year in the US), thanks to
the effects of massively accelerating technological change.
As an example, just consider solar energy use, which is on an expo-
nential path. It’s now only 1% of the world’s energy supply, but
is also only 7 doublings away from becoming 100%. Then we’ll
consume only one 10,000th
of the sunlight hitting the earth. Geo-
thermal offers similar opportunities.
Food is another example of disruption from exponential innovation.
In 1790, farm jobs accounted for 90% of all US jobs, compared to
< 2% today.

22
Still,in2016,ittook63billionlandanimalstofeed7billionhumans.
Land animals occupy one-third of the non-ice landmass, use 8% of
our water supply and generate 18% of all greenhouse gases.
In the near future, bio-printing of meat (beef, chicken, pork) would
allow us to feed the world with 99% less land, 96% less water and
96% fewer greenhouse gases and 45% less energy.
Cloned muscle tissue of cows will be produced in factories, dis-
ease-free, at a fraction of the present cost.
In addition, 70% of a food’s final retail price comes from trans-
portation, storage and handling. Vertical farming, already a $1 bil-
lion industry in 2015, will help eliminate this cost. One acre of a
vertical farm can produce 10-20x that of a traditional farm. Food
delivery will be disrupted by food on demand and drone delivery.
Food preparation is another massive opportunity. The US consumes
nearly 1 billion meals per day and spends an average of 11 million
minutes per day on food prep and clean up. Food preparation and
clean-up will be disrupted by 3D printed food, personalised nutri-
tion and AI-designed recipes12
.
The ultimate upshot is that these technologies will relatively rapidly
help eliminate poverty around the world.
EXPONENTIAL CHANGE MEANS COMPANIES
AND THEIR PRODUCTS NEED TO CHANGE
The rapidly increasing, exponential path of change that we are on
means every industry will need to continually re-invent its business
model, or disappear.
Raskino and Waller of Gartner again:
12 “Reinventing Food”, Nov 2016, Peter Diamandis
“Screw the Nano.
What the hell does
the Nano do? Who
listens to 1,000
songs?”
said Motorola CEO Ed
Zander, speaking at a
conference in 2006.

23
“…the technology tipping point conundrum, which has
previously been restricted to ‘tech’ companies, now extends
to all companies because the next generation of everyday
products will likely include digital capability…
…Over the past twenty years of IT advancement, most
businesses have changed everything but the product. Even
if they now possess advanced, Internet-enabled business
models, they are actually making and selling pretty much
the same kind of products they were making in 1994…
...Changing the product is the final step, and the biggest shock
of all. Internet-connected and embedded digital functions
will become a key part of your product and the value your
customer buys. This value may represent 20%, 40% or
60% of what the customer acknowledges and pays for.”13
The banking industry is an example of where the product, and ser-
vice, must change.
In November 2015 Anthony Jenkins, the former CEO of the
world’s 16th
largest bank, Barclays Bank, said that the IT systems of
all of Britian’s big four banks are “antiquated and inefficient”.
Jenkins warns that if banks fail to deliver superior services to com-
pete with Fintech companies then the banks “risk losing revenue”
and even risk “being displaced”.
Given Jenkins’ credible insight and the fact that technology spend
in the banking industry represents the largest IT spend of any
industry, this is a serious affirmation of the importance of technol-
ogy in industry today.
Indeed, as one can see from the map below, many banks all over the
world understand the threat of technology, and they are actively
13 Digital to the Core, Mark Raskino and Graham Waller

24
acquiring technology companies to create more value and guard
against disruption:
Automobiles are another example of “changing the product” (from
new digital capability and technology capability).
Already, an increasing amount of customer-perceived value of a car
today is digital (eg Bluetooth integration or voice recognition).
Tomorrow’s car ads will promote the self-driving feature or the
heads-up display with built-in driving scene hazard recognition
and analysis14
.
Use of nano materials to build ultra-light but ultra-strong cars will
fuel consumption dramatically. Battery efficiencies will improve by
10 to 100 times. Advances in nanotube construction will mean the
weight of the vehicle will drop from the current 3 tons to just 100
pounds, and will be much safer15
.
14 Digital to the Core, Mark Raskino and Graham Waller
15 Stocks to Buy for the Coming Roaring Twenties, John Thomas
“British Airways
is investigating
offering ‘digital
pills’ that wirelessly
beam diagnostic
health informa-
tion from inside
a customer’s
body. The ‘ingest-
ible sensors’ could
work alongside
in-cabin sleep
monitors and data
from wearables
and smartphones
to personalise each
passenger’s ‘travel
environment’.”
– The Telegraph, 28
November 2016

“The development of mobile
phones will follow a similar path
to that followed by PCs,”
said Nokia’s Chief Strategy Officer
Anssi Vanjoki, in a German interview
(translated through Google Translate).
“Even with the Mac, Apple attracted a
lot of attention at first, but they have
remained a niche manufacturer. That will
be their role in mobile phones as well.”

26
HOW DO COMPANIES DEAL WITH
THESE DISRUPTIVE CHANGES?
With all these changes ahead of us, how can each industry, and the
companies within an industry, “continuously reinvent” their busi-
ness model?
Norbert Schwieters of PwC puts it this way:
“If your company is falling into the trap of thinking that it
can stay in the same industry forever, or even for the next two
decades, you risk losing out to more flexible competitors.
You can avoid this trap by taking on an outcomes mind-
set. Instead of thinking of your company as providing
a particular type of product or service — electric
power, health records management, or automobile
components — think of it as a producer of outcomes.
The customer needs to get somewhere, so you’re not a
car company; you’re a facilitator of that outcome. The
house is cold, so you help make it warm, possibly without
supplying the necessary fuel. Many of the changes taking
place today have come about because a few leading
companies have replaced their products with outcomes.
Customers, in turn, are making fewer purchases to
accumulate physical things and more purchases to
achieve outcomes, convenience, and value.”16
But still, what are the ways to execute on this “outcome” thinking?
How can a company make it happen?
16 “The End of Conventional Industry Sectors”, PwC, strategy+business, 3 Jan 2017
“It’s a little
bit like, is the
Albanian army
going to take over
the world? I don’t
think so,”
said Time Warner CEO
Jeffrey L Bewkes, when
asked in 2010 what he
thought about Netflix’s
push toward licensed
content.
3.

27
An increasing number of corporate executives see the acquisition
of technology companies as the fastest and the most efficient and
productive way to accelerate their corporate transformation.
One reason non-tech executives have become more active in tech-
nology deal making is that they have become more comfortable
with technology itself. They now understand “software” and “the
cloud” etc.
GE has moved its headquarters to Boston, more of a hub for tech
and start-ups than its previous home in Fairfield, Conn. The com-
pany’s recent commercials feature the tagline: “The digital com-
pany. That’s also an industrial company.”
As previously mentioned, a recent EY survey17
showed that 67%
of corporate executives believe acquiring a technology company, ie
acquiring digital capabilities, assets and technologies, can “bridge
gaps and accelerate growth”. A similar number see “rapid response”
as essential.
17 “Dealing in a Digital World”, EY, June 2016

28
Of course, acquiring a technology company has significant
challenges.
Historically, non-tech companies have not felt comfortable paying
the high prices that many technology companies can claim and
often achieve. Older, mature companies that are not as rapidly
growing tend to trade at lower valuations relative to measures like
revenue and earnings, compared with young tech companies that
sometimes do not even have earnings.
Wal-Mart, for example, has a market capitalisation about 65 times
that of what it paid for Jet.com, and it has roughly $480 billion in
revenue compared with what it said was $1 billion in annualized
revenue for Jet.com.
But Wal-Mart is facing ever-more competition from Amazon.com
and other retailers, and executives at the company have said Jet.
com will allow them to expand their e-commerce at a much faster
rate.18
While boards and CEOs of non-tech companies now have a better
understanding of tech company valuation, one of the next chal-
lenges for many of these companies is in integrating their technol-
ogy company acquisitions with the main business.
Shareholders are increasingly judging and expecting their manage-
ment teams to be bold and to play to the future and make strong
long-term strategic moves, rather than short-term tactical fixes.
An additional emerging challenge for would-be tech company
acquirers is that the deal environment today for digital companies
or tech companies is becoming so much more competitive – not
only from tech companies themselves as acquirers but also from tra-
ditional non-tech strategic buyers in all industries who want tech.
More and more traditional companies that are growth-focused are
now thinking “How can we protect against disruption? How can
18 WSJ, Dec. 30th, 2016, “Old-Line Companies Like Wal-Mart and GM Acquire Taste for
Tech Start-Ups”

29
we deliver more value? How can we deliver better outcomes? How
can we meet and beat our customers’ expectations?”
Most interestingly some are even asking “How can we be a disrup-
tor ourselves, rather than be a disruptee?”
These companies are taking action. They are acquiring technology
companies, among many other organic initiatives.
The idea of having a “disruptor” mentality is growing in indus-
try. Rapid advances in technology – which include AI, Blockchain,
IoT, 3D printing, Augmented Reality and Virtual Reality – now
allow for the possibility for everyone to think this way – if they
choose to do so.
Raskino and Waller of Gartner relate the consequences of digital
transformation:
“Your company, and many others in your industry, are facing a
future in which digital technologies will become integral parts
of your products and services – not just in the marketing of
them. If you don’t make that happen, someone else will.”19
The industry remastering is happening now and it is happening in
“fast-motion” – 2x, 4x, 8x, 16x….infinity.
If executives do not pay attention to this trend of exponentially
advancing digital technology becoming an integral part of a com-
pany’s core products and services then they should not be surprised
when it (eg a “Netflix”) stampedes all over them (eg a “Block-
buster”) and crushes them into road kill.
“THIS IS A MOVEMENT”
Of the 45,416 transactions announced in 2016, approximately
6,660, or 15 percent, were acquisitions of technology companies,
19 Mark Raskino and Graham Waller, “Digital to the Core”
“Digital transfor-
mation marches
on. Tech and
non-tech com-
panies alike are
being disrupted by
innovative digital
technologies and
are turning to
M&A in search of
solutions.”
– EY Global Technology
M&A Report: 3Q 2016

30
more than any other sector, according to data compiled by Thom-
son Reuters.20
In Q3 2016, the value of technology companies acquired by “non-
tech” buyers rocketed to $55 billion, which is higher than 2015’s
full year total of $53.6 billion.
20 The New York Times, “For Non-Tech Companies, if You Can’t Build It, Buy a Start-Up”. 2 Jan 2017

31
In other words, in the three months of Q3 2016 the value of tech
companies acquired by non-tech acquirers was greater than all 12
months of last year’s value of tech companies acquired by non-tech
acquirers.
As Donald Trump might say, “this is a movement.”
At $93.2 billion of tech companies acquired by non-tech compa-
nies through the first nine months of 2016, non-tech acquirers of
tech companies are 74% ahead of full-year 2015 – this represents
27% of all 2016 aggregate global tech M&A value.21
In fact, CB Insights reported on 15 Dec 2016 that:
“Non-Tech Acquirers Are Suddenly More Common
Than Tech Companies in Deals For $1B+ Startups”
This is an astounding development.
The chart below shows the eight non-tech companies that have
acquired a venture capital-backed U.S. “startup” in 2016 YTD for
$1 billion or more, vs only one tech company acquirer (Cisco).22
21 EY Global Technology M&A Report:3Q 2016
22 CB Insights, “Non-Tech Acquirers Are Suddenly More Common Than Tech Companies In Deals For
$1B + Startups”, 15 Dec 2016
“We’ve learned
and struggled for
a few years here
figuring out how
to make a decent
phone … PC guys
are not going to
just figure this
out,”
Palm CEO Ed Colligan
in 2006, after news that
Apple was developing a
phone.
“They’re not going
to just walk in.”

32
CB Insights commented: “…the make-up of buyers appears to be
shifting as incumbents across industries ranging from consumer pack-
aged goods to auto to insurance buy into venture-backed companies.”
As evidence of the “movement”, in late 2016 Accel Partners coun-
seled the founders of its invested startup companies to become
more familiar with these older, more traditional companies, an
apparent gesture to the disdain that startup founders often express
about their corporate counterparts.23
M&A IS A SOLUTION – BUT THERE
ARE BUMPS IN THE ROAD
The ultimate cause and core driver now of these technology com-
pany acquisitions by non-tech companies is summed up well by
Raskino and Waller:
23 WSJ, 30 Dec 2016, “Old-Line Companies Like Wal-Mart and GM Acquire Taste for Tech Start-Ups”
“Technology is
in such a state of
rapid evolution,
and tech and most
other industries
are so deep into
disruptive dig-
ital technology
transformations,
that buyers know
they can’t wait for
markets to smooth
themselves out.”1
– EY, November 2016
1 EY Global Technology
M&A Report: 3Q16

33
“Over the past twenty years of IT advancement, most businesses
have changed everything but the product. Even if they now possess
advanced, Internet-enabled business models, they are actually
making and selling pretty much the same kind of products they
were making in 1994. Changing the product is the final step,
and the biggest shock of all. Internet-connected and embedded
digital functions will become a part of your product and the
value your customer buys. This value may represent 20%, 40%
or 60% of what the customer acknowledges and pays for.”24
It is the product or service itself that is now being transformed. As
companies embed more and more digital and Internet-connected
functionality into their core products and services, they inevitably
create more value, guard against disruption and enhance the cus-
tomer experience.
Indeed, as mentioned earlier, several of these growth-focused com-
panies will become disruptors themselves.
Acquiring a technology company – the right technology company –
accelerates this value creation and prevents against being disrupted.
When an acquirer gets a technology acquisition right it can be truly
transformative for the whole company.
An example of this potential game-changing transformation that
can come from acquiring a technology company is evidenced by
Alexa Von Tobel, the CEO of seven-year-old startup LearnVest,
which was acquired by Northwestern Mutual for a reported $250m
in 201525
, describing the post-acquisition culture of the company a
year after the acquisition:
24 Raskino and Waller, “Digital to the Core”
25 RIABiz, 1 April 2015, “The real reasons Northwestern Mutual paid a reported $250m for LearnVest”

34
“The really exciting thing about bringing together a
106-year-old company and a seven-year-old data-driven,
fast-moving start-up is the chance to create a third culture,
which makes innovative, data-driven decisions, and does
them at scale. I think it’s going really, really well so far,
because our core values are completely aligned.”26
When a traditional growth-focused company acquires a technology
company it can achieve at least some or all of the following:
„„ Create new products and services (that
would not otherwise be possible)
„„ Produce a higher quality of goods
„„ Improve inventory turns
„„ Reduce costs
„„ Squeeze more productivity and efficiency from your assets
„„ Make your customers a lot happier than they were before
„„ Get some really talented and able new staff
„„ Catalyse a culture change
However, a corporate acquirer has to acknowledge that acquiring a
technology company can be very tricky, with a lot of moving parts.
Acquiring a tech company is not like buying a house or an oil field
or a factory.
It’s more like buying a Formula One team – think engine, driver,
tyres, weather, equipment, fuel, design, pit crew, track, other driv-
ers, manager, tech support staff – and then mix it all up together.
If a company doesn’t have its act together on each of the individual
disciplines as well as on the overall web of disciplines seamlessly
26 McKinsey & Company, “How a culture survives when a start-up merges with an incumbent”, November
2016
Steve Jobs:
“It doesn’t matter
how good or bad
the (Amazon
Kindle) is, the fact
is that people don’t
read anymore.”

35
interconnecting with each other, then forget it – the company will
lose. There is no point even trying.
It’sthesamewithacquiringatechnologycompany.Ifoneapproaches
it in an ad-hoc, opportunistic or unplanned manner then failure is
likely.
In fact, there are probably 1,000 ways a technology acquisition can
go wrong.
If an acquirer does get it wrong, then it can cost the acquirer mil-
lions and millions of dollars (or euros, pounds or yen), and months
and months, and sometimes years, of painful undoing.

Microsoft CEO Steve Ballmer had this to say
about the iPhone’s lack of a physical keyboard:
“500 dollars? Fully subsidized? With a
plan? I said that is the most expensive
phone in the world. And it doesn’t
appeal to business customers because it
doesn’t have a keyboard. Which makes
it not a very good email machine.”

37
FIVE OF THE MOST COMMON
MISTAKES CORPORATES
MAKE WHEN ACQUIRING A
TECHNOLOGY COMPANY
Five of the most common mistakes we see corporates making when
acquiring a technology company include the following:
MISTAKE # 1 - ACQUIRING THE WRONG
COMPANY
Too often a corporate will acquire a target company because it
was relatively easy, or “it was there”, instead of ensuring that it
was the right company after undertaking an exhaustive search
and review. Acquiring the wrong company can happen for many
reasons, including the following:
a. The CEO knows the target and its management, and
overly influences the other executives on his or her man-
agement team without properly scrutinising the target
b. One of the company’s leaders likes a company from his or
her historical relationship and pushes it through without
doing a thorough review of the target’s competitors or
peers and of other alternatives (including other targets or
joint ventures, partnerships and strategic investments).
c. The CFO, Head of M&A or Head of Corporate Devel-
opment has been tasked by the CEO or board with mak-
ing one or more “acquisitions”, but is under-resourced,
and relies only on internal leads rather than being able
to reach out externally for support and advice, including
sourcing fresh ideas, leads and guidance.
d. The management team is “sold” on a target by an invest-
ment bank leading an auction of the target. The bank pro-
motes the target’s “scarcity value” and claims that “your
competitors will own it if you don’t” etc. The acquiring
management and board succumbs.
RIM’s co-CEO, Jim
Balsillie, wrote off the
iPhone almost completely:
“It’s kind of one
more entrant into
an already very
busy space with
lots of choice for
consumers … But
in terms of a sort
of a sea-change
for BlackBerry, I
would think that’s
overstating it.”
4.

38
e. Management wrongly believes it needs the target based
on the wrong assumptions it has made about its own stra-
tegic imperatives.
MISTAKE # 2 - NOT BUILDING A
RELATIONSHIP WITH THE TARGET’S
FOUNDERS / MANAGEMENT
If a corporate doesn’t build a relationship with the founders
or management team of a target technology company, then
sometimes the founders or leaders of the target will leave the
acquiring or merged company, even before the earn-out period
is completed.
Founders of technology companies are often sensitive, particu-
larly to their own products, services or creations. If the acquir-
ing company executives don’t show that they appreciate this
sensitivity – both before and after a deal completes – then they
can lose the top executives of the target company, which could
cause other valued employees to leave, which could cause value
destruction of the asset acquired.
Technology company executives need to know they are valued.
They need to know that they and their talented staff matter, and
that they will make an important impact on the acquiring com-
pany. They cannot be forgotten. Building a relationship with the
founders and management team of the target technology com-
pany can be as important to the acquirer’s success as any asset of
the target company.
MISTAKE # 3 - ASSUMING THE EARN-
OUT, PERFORMANCE-BASED DEFERRED
CONSIDERATION MATTERS MORE THAN THE
UPFRONT PRICE PAID AT CLOSING
Founders and technology company leaders have typically spent
years and years secreting blood, sweat and tears working early
mornings, late nights, weekends, and experiencing lost custom-
ers, lost employees and other painful disasters. Sometimes they

39
just want out. Often they will leave before they receive their full
earn-out deferred consideration, particularly if they are feeling
especially unloved, tired or frustrated.
Sometimes acquirers can increase the offered upfront consider-
ation amount only slightly while relatively dramatically reducing
the long-term incentive consideration and compensation. This
might seem counter-intuitive, but it’s all about getting inside of
the heads of the founders and leaders of a tech company.
MISTAKE # 4 – NOT ARTICULATING WELL
ENOUGH WHY YOU WANT TO ACQUIRE THE
COMPANY
If the founders / leaders of a technology company believe that
you don’t understand them, they might balk at your approach.
Even if you offer an attractive price, or package of value as
terms, they might accept another offer instead. Alternatively,
you might agree terms with them, but they might just take the
cash and then leave.
Fundamentally, the founders and leaders of technology compa-
nies want to be understood. They want to feel that an acquirer
appreciates them and their products or services and what they
have created. They want to know what the acquirer’s strategy
is: “What do you intend to do with us and our product/service
and why?” They want to know the big picture. They want to be
inspired. They want to know how their product will help change
the world by your owning it instead of them.
If the founders and leaders of a tech company are going to sell
their “baby”, they want to know that it will be in good, safe
hands, and that it will grow. Show them how you intend to treat
the baby, and how you intend to nourish it, and grow it, so that
the original “parents” can be proud as the baby grows up.
Early on in Google’s
ascendancy, Steve Ballmer
of Microsoft made his
disdain for the search
giant known, up to and
including discounting its
very status as a company.
“Google’s not a real
company. It’s a
house of cards.”

40
MISTAKE # 5 – NOT PAYING ENOUGH
ATTENTION TO “PEOPLE”
Of course “technology” is about “technology”.
But technology is also about people. Technology does not exist
without people. People create technology. Technology doesn’t
create technology…at least not yet.
If people create technology, and people form a company around
the technology, then when one acquires that company it is not
just acquiring the technology, it is acquiring the people that are
intimately involved and intertwined with that technology.
Perhaps one the main reasons that technology acquisitions
go wrong is not because of “overpaying” on price, but rather
because of “underpaying” on people.

41
When an acquirer underpays on people, or gets the culture fit
wrong, then the target company starts to bleed. First it bleeds
people, then it bleeds fans and customers, and then it bleeds
product quality. When a technology begins to bleed on product
quality, then that is the beginning of the end. This is the point
at which everyone begins saying it was a “bad deal” and “that
deal should never have been done” and the most famous of all,
“they overpaid”.
“We have not
seen a direct effect
[from Airbnb] in
any of our hotels
… We don’t feel
it’s having any
impact on our
results or that it
has hit our radar
as of yet,”
said Richard Jones,
senior VP and COO
of Hospitality Ventures
Management Group, in
2014.

Stan Shih of Acer claimed that Apple’s foray
into computers was an aberration and that the
company would fail to make a niche for itself:
“Apple is like a mutant virus, escaping from
the traditional structure of the PC industry,
but the industry will still eventually build
up immunity, thus further blocking this
trend, and we believe the size of the non-
Apple camp will exceed Apple’s, because
this is how the industry normally evolves.”

43
THE GOOD NEWS – THERE IS
A SCIENCE TO ACQUIRING A
TECHNOLOGY COMPANY
There is a solution to many of these challenges. It involves convert-
ing the art of acquiring a technology company into a science – a
science we call TechquisitionTM
.
There are 12 essential steps to the TechquisitionTM
method of tech-
nology company acquisition. These steps – when properly executed
– will help any acquirer to create and retain maximum value from
a technology company acquisition.
Described below in brief are the 12 steps of the TechquisitionTM
method, which a prospective acquirer can deploy to acquire the
right tech company to create more value, guard against disruption
and enhance the customer experience:
In 1876, Western Union
Telegraph company
was offered the chance
to purchase the patent
on Alexander Graham
Bell’s telephone. William
Orton, President of
Western Union, failed to
see the value of the newly
invented device:
“What use could
this company
make of an
electrical toy?”
5.

44
1. QUALIFY – In the initial and critically important step of
TechquisitionTM
– “Qualify” – you will want to thoroughly
assess and sense check your strategic imperatives against the
industry and market trends, the competitive environment
and your positioning in it, the capabilities you need, cus-
tomer demands and the evolving technological landscape.
Take the time to review your board’s decision and specifi-
cations to acquire a technology company; ideally you will
confirm the consensus opinion and specifications via a third
party adviser.
2. SEARCH – In step 2, “Search”, you will want to undertake
a comprehensive global search to identify all the potential
available target companies in the world that fit the speci-
fication determined in the Qualify phase. Leave no stone
unturned. Assume nothing. Use every resource available.
Saving nickels and dimes in the Search step can cost you
millions in the end, particularly if you acquired a company
that was less than the ideal company because you didn’t find
the company that you should have acquired. Your perfect
target is out there. Find it.
3. DIAGNOSE – In step 3 of TechquisitionTM
– “Diagnose”
– you should review and analyze the candidate target com-
panies identified in the Search phase against a long list of
criteria, including company size, profitability, growth, geog-
raphy, competitive positioning, quality of product/solution,
protected IP, scalability of the IP, potential fit (strategic and
operational), management team, likely valuation range,
shareholding, relationships with your networks and your
advisers’ networks, etc. Don’t assume too much or discount
companies too early in the Diagnose step – you don’t know
what you don’t know, until you start making calls and get-
ting the real scoop.
4. TARGET – In step 4 – “Target” – you will want to review
and discuss the target companies from the Diagnose phase,
assessing not only the traditional “pros” and “cons”, but also
critically asking the questions internally of each candidate
target company “What makes this target company special?
What makes it special for us? Why? How well does it fit into
our ecosystem?” If you’re not sure of the answers to these

45
questions then go get the answers – make the calls you need
to make to collect the intel you need to inject into the dis-
cussion. Once you’re satisfied that you have the answers you
need to the critical questions above, then rank and prioritise
the target companies. Create a shortlist of the most appropri-
ate companies to contact in the next step.
5. CONTACT – Step 5 – “Contact” – is when TechquisitionTM
starts to get interesting. For each candidate identified as a
priority target in the Target step you will want to create a
bespoke script (the Chalk TalkTM
script), based on what was
determined as “special” about the target from the Target
phase. This is when you can start to leverage your network
and your advisers’ networks of relationships to contact the
right people at the target company and articulate the oppor-
tunity to them via the Chalk TalkTM
script. If you get trac-
tion with the target company then you’ll want to arrange for
NDAs to be signed and obtain additional critical informa-
tion on the target company.
6. ENGAGE – Step 6 of TechquisitionTM
– “Engage” – is when
the process starts to get real. This is when you start to spend
serious time and money on the project, which is why Step 1
(Qualify) is so important.
(Unless you are from Step 1 committed to achieving a suc-
cessful, game-changing result from TechquisitionTM
then
there is little point going through the “expensive” Engage
phase – it would be like paying for a joy ride in a private jet
rather than paying to go in that jet from point A to point B
as quickly and as productively as possible).
In the Engage step, after having further qualified the target
company from the Contact step, begin a dialogue between
your management team and the target company manage-
ment / founders and/or shareholders. Your best line (vs staff)
executives should lead the discussions, if possible. Identify
the target’s key staff early (which often will not include the
CEO) and build a relationship with them. This is the stage
at which the “culture check” begins. Initial meetings can be
informal, but craft a specific agenda for more formal meet-
ings between the key staff of the target company and your
Daryl Zanuck,
co-founder of 20th
Century Fox thought that
the TV itself wouldn’t
catch on:
“Television won’t
be able to hold
onto any market it
captures after the
first six months.
People will soon
get tired of staring
at a plywood box
every night.”

46
management. Ensure that you are still engaging simultane-
ously with several target companies from the shortlist in the
Target phase as “beggars can’t be choosers” – ie sometimes no
matter what you do, even after increasing the price, you can’t
get what you want, so you have to decide if you can still get
what you need. Keep more than one door open.
7. VALUE ASSESS – Step 7 of TechquisitionTM
– “Value
Assess” – is when you start to seriously consider making
an offer for the target company. After the initial meeting(s)
with the target company and further qualification after each
meeting or call during the Engage phase, you can then pre-
pare an indicative valuation of the target company, including
its IP and talent assets, and also an analysis of the strategic
fit, including the pros and cons of a transaction, a risk anal-
ysis and the risk mitigation actions. Note that fast-growing
innovative companies attract a crowd and can be snapped up
quickly by other bidders. Lead from the front; don’t find out
the bad news the hard way.
8. VALUE RETAIN – Many acquirers focus early in the process

47
on the value they can “get” rather than the value they can
“retain” after the acquisition is complete. This would be a
mistake. Step 8 of TechquisitionTM
– “Value Retain” – aims
to eliminate this problem. Assuming a target company still
qualifies for a formal acquisition approach after the “Value
Assess” step, the culture fit decision must be made. Often
it’s “no fit, no deal”. With tech companies culture can be
everything.
Beyond assessing culture fit you can qualify and confirm four
additional key success factors to achieve a “Bleed-FreeTM
”
acquisition:
(a) can the target’s key talent be retained and if so how?
(b) can full ownership of the target’s IP be secured and can
all IP rights be protected?
(c) will the target’s customers genuinely be happy with this
acquisition (why and, specifically, how?) and
(d) will our customers genuinely be happy with this acquisi-
tion (why and, specifically, how?)
9. OFFER – Getting to this step 9 – “Offer” – can take a lot of
time and effort (as steps 1-8 of TechquisitionTM
do require
time and effort). But it is worth it. Based on (a) the outcome
from the “Value Assess” and “Value Retain” phases, (b) any
timing constraints you and the target company might be fac-
ing, and (c) your available alternatives to acquiring the target
that meet the specs (from the Qualify phase), you can now
draft the conditional offer to be made to the shareholders of
the target company.
Ensure that the offer leads with a thorough articulation of
what has inspired your approach to the target company.
This is critically important, because the vendor(s) often
form a view on your offer and decide for several different
reasons, not just “money”. The decision makers are human,
not robots, and humans are emotional beings, so make the
emotion count. Use emotion to your advantage. If you are
motivated and sincere, and note that a modification of the
original Chalk TalkTM
might still apply here, then you will

48
be welcomed with open ears. Include why you are so excited
about the business combination and the strategic fit as well
as the benefits you see for the target company stakehold-
ers. Remember in tech company acquisitions the “why” can
often matter more than the “price”.
10. AGREE – Negotiation is the essence of step 10 of
TechquisitionTM
– “Agree”. We believe it is by far best to
make your offer during a physical face to face meeting with
the vendor(s), but we know this is not always possible. So, if
your offer is not made during a meeting with the target com-
pany, then after sharing your offer with the target (usually via
email and/or video conference or conference call), then plan
a meeting (which does not need to be called a “negotiation”
meeting) regardless of the target company’s response to your
offer. You’ve made it this far, so be sure to keep talking, and
realize that there is almost always more than one way to skin
a cat.
Before your meeting, or otherwise during the meeting, above
all seek first to understand, imparting as much “pre-suasion”
as possible before you enter detailed discussions. (Note that
agents can be quite helpful here). Negotiation of a tech com-
pany acquisition is all about agreeing the package of value
and terms, not just about agreeing the “price”. Price is just
one of many terms, and many of them can be as equally
important as “price”. Negotiate with power first and fore-
most. Always start with power. Default to creativity if nec-
essary as a supplementary or supporting mechanism. Most
negotiators start with reason, but we advise using reason only
as a last resort, and only if you are certain it will help.
11. CLOSE – After you have negotiated the terms and
formally agreed the package of terms (via a binding Letter
of Intent or Heads of Terms etc that includes exclusivity
arrangements), then you have entered step 11 of Techqui-
sitionTM
– “Close”. To close the transaction you will want
to initiate confirmatory due diligence and documentation of
the final definitive agreements.
Many executives forget to ensure well in advance of the
Offer step that all their supporting team members (ie your
“…..Every
company will
need to become
a technology
company.”
– Mark Raskino and
Graham Waller, Gartner
Group

49
advisers) are in place to support you in the Agree and Close
phases as appropriate. Preparation is everything. Your advis-
ers include financial advisers, legal, accounting, commercial,
tax, insurance and PR advisers. Regarding announcements,
ensure that any deal announcement (which often happens at
the Agree phase) is discussed and agreed by both you and the
target company to avoid disagreements and misunderstand-
ings before you have even closed the transaction. In fact this
is a good proxy for how to operate and manage expectations
going forward in the merged companies – communicate
early and often. Whenever in doubt, communicate.
12. LEVERAGE – So after 11 well-earned steps of Tech-
quistionTM
the deal is finally closed. But does that mean your
job is complete? No, the post-completion action plan of
a tech company acquisition is critical to remaining Bleed-
FreeTM
and to creating shareholder value, particularly for
the first 100 days and particularly for those targets that you
intend to integrate with your core operations. Step 12 of
TechquisitionTM
– “Leverage” – is when it all comes together.
The subject of “People” might not have been the most import-
ant value element during the first 11 steps, but it certainly is
among the most important value elements post-completion.
You’ll want to ensure early on in the process (usually by the
Offer phase) that you have the proper post-completion sup-
porting mechanisms in place. Usually the most effective of
these mechanisms is employing a specialist post-completion
consultant, particularly one that has a very strong compe-
tency in “People” and IP and significant experience in tech
company acquisitions. Leverage this consultant, as well as
the selected staff on your team and the key staff at the target
to make the magic happen.
Successfully completing the essential 12 steps of TechquisitionTM
can deliver an acquisition that can transform the acquirer’s busi-
ness and protect and create shareholder value. In many cases it can
convert a company from a “disruptee” to becoming a “disruptor”.
The TechquisitionTM
method can be a bit overwhelming to achieve
as an organisation. However the result for the acquirer can be

50
truly phenomenal and is worth it. Creating exceptional results and
growth like this is why leaders are in business.
The truth is most companies need a partner or adviser to help them
with the TechquisitionTM
process, whether it’s us or someone else.
If you’d like to know more about how to use the TechquisitionTM
method then reach out to us directly at contact@aquaapartners.com.
We’ll be happy to help.
Remember, every company is going digital now. Bold companies
confident of controlling their future are acquiring technology com-
panies. Get it right. Use the TechquisitionTM
method.
Your board and shareholders expect it.

51
1-6 Yarmouth Place, London W1J 7BU
Tel : +44 203 725 6451 . Fax : +44 203 170 8101
Authorised and Regulated by the Financial Services Authority
“We enable growth-focused companies to create
more value and guard against disruption by
acquiring the right tech companies.”
www.aquaapartners.com
contact@aquaapartners.com

Techquisition - Don't Be Disrupted. Be Disruption.

Techquisition - Don't Be Disrupted. Be Disruption.

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