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November 16, 2017

Emerging technologies such as artificial intelligence, the Internet of Things, and cloud computing are disrupting industries and the ways in which consumers and companies interact with each other. They’re helping companies transcend boundaries and barriers to change the face of business. Organizations that focus on using technology to reimagine their products, services, and business models, see an increase in customer loyalty, chunkier margins, and healthy growth in revenues.

There is no doubt that technology is one of the most important investments that companies need to make, to stay relevant. However, not all companies have the capabilities to develop and adopt such smart solutions. These firms, could acquire other firms that do have these capabilities – but there are many risks with such tech-acquisitions. Acquirers often fail to realize the synergies from the deal.

If you’re thinking about acquiring another firm to grow your tech capabilities, here are some challenges you might face in the process of integrating the firm into the wider organization:

  1. Integration agility: Acquiring organizations often find that the integration is slowed down by their legacy systems and technology, intellectual properties, and the regulatory requirements they are bound by. To counter this and enable smooth integration, you must create and use a standalone integration strategy for digital transactions.
  2. Valuations and due diligence: When organizations evaluate different firms for the technological capabilities they offer, they often find that they lack the information needed to determine their true value. In such circumstances, acquirers must use enhanced techniques and out of the box thinking to identify, screen, and select the right acquisition targets.
  3. Talent management: Part of a firm’s technological capabilities can usually be attributed to its talent pool. As a result of acquisitions, however, firms tend to lose the best of the new firm’s talent and must deal with them carefully. Failing to retain the talent can sometimes lead to losing the edge that the firm brought in the first place.
  4. Cultural alignment and diversity management: When you acquire a firm for its tech capabilities, chances are that it will have a culture that is slightly differentto your organization. For successful integration, acquiring firms need to ensure they manage the culture well and ensure that the culture that helped the target firm fuel itself isn’t lost.
  5. Cyber security: Acquiring firms often have several security challenges and associated reputation risks when infusing their services, products, and business models with technology. In order to make the integration process smoother, organizations must work on identifying and patching vulnerabilities and avoid damaging their business.

Tech-acquisitions can help traditional companies catch up with and gain an edge over the competition and deliver simplicity, transparency, and innovation to customers seeking more from the businesses they engage with. Acquiring and infusing technology into your organization’s DNA is, therefore, critical to survival in most industries and markets, and is a great strategy to win in the digital age.

If you’d like to know more about how your organization can benefit from tech-acquisitions or are keen to uncover the steps you need to take to make such deals successful, read our whitepaper Acquisition Route to Digital Success.

Pradipta Chakraborty is a Strategic Business Solutions Consultant at Tata Consulting Services’ Consulting Practice and leads evangelization of CxO-focused strategic solutions with specific focus on M&A and digitalization. Pradipta holds a B.E. in computer science and engineering and attended the postgraduate program in general management at the Indian Institute of Management, Kolkata.


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