MERGERS AND ACQUISITIONS ILLUSTRATION 11.2 To deal or not to deal - that's the multi-billion dollar question To evolve Alphabet needs to acquire big, but does it have the right post-acquisition skills? With $70bn (42bn, 53bn) in cash, there was spec. inside another group in the company and they couldn't ulation that Alphabet, formerly Google, might make a make decisions as freely as before. This affected their big acquisition, as shareholders would otherwise press willingness to remain. for a special dividend or share repurchase. When Google approached Tony Fadell, CEO of Nest, Prior to becoming Alphabet, Google had always the maker of the learning thermostat, the question been a serial acquirer with over 180 deals. Few were was how he wanted to spend his time. He had lim- in excess of $1bn although the top ten cost more than ited resources for expansion and was working always $24.5bn in total. Many of Google's most well-known on managing the day-to-day. Google promised a big products, including Android, YouTube, Maps, Docs and payday, retention of the Nest brand name, investment Analytics, came from acquisitions. for expansion and time to develop new products. Nest Originally, Google did not set a priority on fit was acquired for $3.2bn to build Google's smart home between its target companies and its own organisation initiative of connecting devices that anticipate human Acquisitions were simply ways to enter new markets, behaviour. Post-acquisition, Fadell didn't need formal gain talent or give Google a stronger foothold where approval for anything although he met regularly with its own efforts had failed. For instance, acquiring You Larry Page. Tube came after Google Video stalled. Soon there were Alphabet is facing multiple threats with declining too many separate products, and CEO Larry Page reor share of desktop searches, Facebook taking advertising ganised into seven core product areas in 2011. There dollars and Amazon stealing product search queries were fewer 'acquisition hires' and for a deal to com in the mobile market. It needs new revenue sources plete it had to pass his 'toothbrush test' - a product to compete effectively and innovate continually - you use daily to make your life better. A target must can't all be from within'. Although skilled at acquiring also enhance an existing product and be scalable. small companies, Google had had less success with Most of Google's acquisitions had been start-ups. larger acquisitions as the biggest, Motorola Mobility. Retaining start-up founders can be very difficult as $12.5bn, failed and was later disposed of. With a new they think of themselves as entrepreneurs who like company structure of Alphabet as a holding company, doing their own thing. Many acquirers have struggled and Google as a subsidiary, perhaps a new way of inte to retain the expertise they have spent millions acquir grating larger acquisitions is possible that may be more ing. However, Google has retained at least 221 start-up appealing to potential targets. founders whilst closest competitor Yahoo retained only Source: http://beyondthedenblog/2012/05/30google-acquisi 110. Google competed with other potential purchas- tions and integrations-a-tale-of-two-cities Business Insider, 2 May ers on offering huge resources to founders to enable 2015, TIME.com, 15 April 2015 Quart, 15 August 2015, Wired.com 14 January 2014 them to initiate their product visions faster. Founders were asked what their product would look like with a billion users? For instance, Keyhole's founders were asked to adapt their desktop digital mapping software Questions for urban planning to work on the web. It became 1 Using the post-acquisition integration matrix, Google Maps - the world's largest source of location Figure 11.3. compare Google's early style of data, And Google would give entrepreneurs space to acquisition management with the integration innovate, handle contracts, patents and intangibles. of Nest. However, unless acquisitions were large, few continued to run independently. Often founders were rolled up 2 How has Google managed to be successful in retaining entrepreneurial talent? 349 MERGERS AND ACQUISITIONS ILLUSTRATION 11.2 To deal or not to deal - that's the multi-billion dollar question To evolve Alphabet needs to acquire big, but does it have the right post-acquisition skills? With $70bn (42bn, 53bn) in cash, there was spec. inside another group in the company and they couldn't ulation that Alphabet, formerly Google, might make a make decisions as freely as before. This affected their big acquisition, as shareholders would otherwise press willingness to remain. for a special dividend or share repurchase. When Google approached Tony Fadell, CEO of Nest, Prior to becoming Alphabet, Google had always the maker of the learning thermostat, the question been a serial acquirer with over 180 deals. Few were was how he wanted to spend his time. He had lim- in excess of $1bn although the top ten cost more than ited resources for expansion and was working always $24.5bn in total. Many of Google's most well-known on managing the day-to-day. Google promised a big products, including Android, YouTube, Maps, Docs and payday, retention of the Nest brand name, investment Analytics, came from acquisitions. for expansion and time to develop new products. Nest Originally, Google did not set a priority on fit was acquired for $3.2bn to build Google's smart home between its target companies and its own organisation initiative of connecting devices that anticipate human Acquisitions were simply ways to enter new markets, behaviour. Post-acquisition, Fadell didn't need formal gain talent or give Google a stronger foothold where approval for anything although he met regularly with its own efforts had failed. For instance, acquiring You Larry Page. Tube came after Google Video stalled. Soon there were Alphabet is facing multiple threats with declining too many separate products, and CEO Larry Page reor share of desktop searches, Facebook taking advertising ganised into seven core product areas in 2011. There dollars and Amazon stealing product search queries were fewer 'acquisition hires' and for a deal to com in the mobile market. It needs new revenue sources plete it had to pass his 'toothbrush test' - a product to compete effectively and innovate continually - you use daily to make your life better. A target must can't all be from within'. Although skilled at acquiring also enhance an existing product and be scalable. small companies, Google had had less success with Most of Google's acquisitions had been start-ups. larger acquisitions as the biggest, Motorola Mobility. Retaining start-up founders can be very difficult as $12.5bn, failed and was later disposed of. With a new they think of themselves as entrepreneurs who like company structure of Alphabet as a holding company, doing their own thing. Many acquirers have struggled and Google as a subsidiary, perhaps a new way of inte to retain the expertise they have spent millions acquir grating larger acquisitions is possible that may be more ing. However, Google has retained at least 221 start-up appealing to potential targets. founders whilst closest competitor Yahoo retained only Source: http://beyondthedenblog/2012/05/30google-acquisi 110. Google competed with other potential purchas- tions and integrations-a-tale-of-two-cities Business Insider, 2 May ers on offering huge resources to founders to enable 2015, TIME.com, 15 April 2015 Quart, 15 August 2015, Wired.com 14 January 2014 them to initiate their product visions faster. Founders were asked what their product would look like with a billion users? For instance, Keyhole's founders were asked to adapt their desktop digital mapping software Questions for urban planning to work on the web. It became 1 Using the post-acquisition integration matrix, Google Maps - the world's largest source of location Figure 11.3. compare Google's early style of data, And Google would give entrepreneurs space to acquisition management with the integration innovate, handle contracts, patents and intangibles. of Nest. However, unless acquisitions were large, few continued to run independently. Often founders were rolled up 2 How has Google managed to be successful in retaining entrepreneurial talent? 349