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Saturday, August 05, 2006

The Mighty Google & Tiny Acquisitions

Courtesy of Google Blogoscoped came across this interview of
Eric Schmidt. I listened to the interview as well.

Reporter: How many acquisitions do you do?
Schmidt: “It’s one or two a week it seems. Most acquisitions: They are very small. 1-2-3 people and you never, never hear about them.”
“Why would you want to be acquired?” Schmidt asked reporters rhetorically.
“The venture guys have so much money, you don’t need to get acquired by us for capital.
“The reasons…that they (start-ups) would choose be to be acquired are not what you might think. There is so much capital. And many of these businesses require no capital.
“The reason to be acquired is that Google gives them (Web entrepreneurs) a platform that they might otherwise not be able to get. As markets consolidate these little companies often cannot get enough ‘mindshare,’ even though their technology is really good. Any one of these people are a reasonable (acquisition) candidate.”

Also listen to Eric talking about how some thought that Google is run by idiots and how it too faces problems like every other enterprise.

I certainly feel that Google Hype need to be watched more carefully, but I can give it- that they have been very sensible about their acquisitions. They have not taken(so far), throw money and grab that share/space approach(mostly). Instead they had been trying to take the business as growth platform approach, atleast in their core business. I was looking at the analyst reports about as few companies that I watch – where acquisition concerns abound. Recently, I was talking to a good friend, who was not decided on an opportunity that would have meant that he would be earning almost twice in a company of better stature and bigger size - he said that one concern that was holding him back was that the other company had made a series of acquisitions in the recent past and the information is that the integration is taking time and proving to be painful. The general refrain is that acquisitions destroy value. Generally speaking, as many as two-thirds of all acquirers fail to achieve the benefits planned at the outset of an acquisition. In part, this is thought to be due to the fact that too many acquirers are more concerned about size and top-line growth than value creation. Ofcourse there are exceptions – well crafted acquisition moves can help charter the road to success. Only a handful turn out to be a long-term win for shareholders. Smaller acquisitions in contrast are easily integrated and where successful definitely creates value. That’s why seen through the lens of Eric Schmidt, Google's acquisition strategy stands out to be sensible – on an industry where , every growing company looks attractive. In the enterprise space, SAP Acquisition strategy also looks lot more sane at a time when acquisitions galore and it could even be threatening the ecosystem.

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