As BusinessWeek pointed out last week, 2010 is turning out to be a banner year for technology company mergers and acquisitions, especially in the Internet and hardware arenas. This year the total value of tech mergers will surpass $60 billion. Some examples:
- Google spent $1.6 billion on more than 20 companies in the first nine months of the year. It also has pending acquisitions ITA Software and AdMob.
- Dell bought Boomi, a cloud-related company, and is racing its rivals to gobble up companies that can help it double its computer server, data storage, networking gear, and technology services businesses to $30 billion in sales by the end of fiscal 2014.
- HP got caught in that insane bidding war for 3Par ended up paying $2.35 billion for it, more than triple the company’s market value prior to the sale.
- Amazon is spending $500 million for Quidsi Inc., owner of Diapers.com. That’s a lot of diapers.
So what does all this mean for the IT community?
IT Buyers Are Sitting Pretty
One thing is that the big hardware/services companies are quickly trying to outgrow each other and attract you as their client for big future purchases of networking gear and, more importantly, services. Dell is just getting up to speed here, but it’s ready to take on HP, and both of them are gunning for IBM, which is waning on the hardware side but has never been more powerful as a services provider.
No matter whom your preferred hardware/services vendor is, you may want to experiment with some grumbling in 2011and see how your sales rep reacts. In what is becoming a hypercompetitive marketplace, the customer wins.
Small Businesses Can Create Decent Exit Strategies
Almost every technology-related venture capital business plan comes with a page called "exit strategy," where the founders describe how they’ll eventually sell out to someone bigger and win the acquisition lottery. The environment described by BusinessWeek should bring with it lots of opportunities for successful tech businesses to cash out next year. Maybe you work for one. Maybe you’re even a shareholder.
Mergers Put Jobs in Peril
The flip side of the above: If you happen to work at a company that’s on either the buy or sell side of a merger, the news isn’t quite so good. Mergers and acquisitions rarely generate new jobs within the newly merged company. Jobs evaporate as the bottom-liners look for "new efficiencies" and strive to "eliminate overlap." It can happen in any department and affect workers at any level and with any skill set. In fact, the people with the targets on their backs are often the most experienced (and therefore most expensive) employees.
There’s little good advice that can be brought to bear when events like these suddenly overwhelm a company. Perhaps the best thing to do is to participate in the rumor mill and try to find out what kinds of severance deals are floating around. Who knows? Maybe volunteering to get pushed aside could turn out to come with a decent financial reward.
All this is just further proof that even the techiest gearheads have to pay at least a little bit of attention to the business section of their favorite newspaper or website. Business moves really fast, and the technology landscape can change in a flash. With each new move comes new perils and opportunities. To stretch a painful metaphor: You want to ride the wave, not get drowned by it.
– Don Willmott