John Chambers, Honorary President of Cisco (now founder) JC2 projects), Knows one or two things about technical acquisitions: he bet on his career at the first course in 1993, and continued to complete 180 M & As operations during his 20 years in office.
His last message to big companies is the alarm bell. In a chat about the heater in HAX M & A Masterclass which followed the publication of his book: Linking Points: Driving Lessons In the world of startup, Chambers issued a clear warning: you may be learning about M & As technology or the future without you.
Here are the key lessons to take (video and written versions are Here):
1. Mergers and acquisitions are a vaccine against apathy
When Cisco stepped down in 2015, John Chambers said it 40% of companies will be dead in 10 years. 10 years may now be conservative.
It took about 20 years to Amazon to challenge Wal-Mart, barely 10 to Airbnb with hotels and to Uber with taxis and car ownership. The next wave may take 4 to 5 years. Since no company can invent everything – even Apple or Google routinely buys startups – you'll need to Buy or partner Seriously with startups (more on that later).
2. Technology enters every sector
"Each company will probably be acquired over the next decade by a technology company indirectly or directlyChambers said.
Non-technical companies need to accelerate how they work with technology, startups. Many executives were Dave Corp who attended our last event Not Of technology.
I recently met energy utility companies from the US and Europe. They have just established CVC weapons. They were looking at acquisitions, they said "We do not know software". They are the best Dealing with the learning curve of mergers and acquisitions Quickly!
3. Customers can tell you what to buy
There was only one Steve Jobs, who knew what to build. For others, you have customers You may want to buy it. Listen to them and pay special attention to Market transformations To buy Next generation products.
As in Chambers at the beginning of his career at IBM with major computers, and at Wang's labs with small computers, a critical shift in the end may be the end of your business! The natural result of startups is: doing something great for key customers in companies, you'll get their radar in no time!
4. Choose the right match
"When you buy a company, everything is negotiable except strategy and culture", Chambers said.
Oracle has been able to control acquisitions, but for most others acquisitions can fail due to poor alignment Vision Industry and the role of each company, cultural Mismatch, geographic Distance: After Or lack of integration Systems (Once you scale down the number of your acquisitions, having different departments or sub-companies using different programs will make your financial business crazy).
There are generally more than one potential M & A goal, and Cisco has often moved away from potential purchases for the above reasons. Also developed Effective Processes: "I used to show the process in the bureaucracy, but addressing the right to it can give you the speed that others can not match"Chambers added.
5. Build Your Play Rules (s)
Again, mergers and acquisitions in the 1990s in technology were often failures. Chambers and his team searched for the reason for creating the Cisco boot directory, and then modified it for two decades. According to Chambers, Most of them can apply to other companies. So save yourself some time and costly attempts by getting his book;)
Interestingly, they came close to moving the leadership the same way: they studied what made them work or failed, and made it as smooth as when John stepped down in 2015.
6. Do your homework
A common feature of team development teams is the amount of work that has been put in place before approaching an emerging company.
They are not only aware of much through their own research, their clients, their business units, CVC weapons or the media, but also across large networks, including VC companies.
Such as investors, You are just as good as your transaction flow. Corp Devis then Value model An emerging company may check and pay the right price for it (more on this below).
7. Pay for what value is for you
Hot startup can lead to a high price, however Is worth it for you?
If it does not offer any integration or synergy, it may actually be Negative value. Conversely, current revenue for startup may be irrelevant if you can Dawn their product through your channels and make it 10x or 100x.
Chambers, which it bought in 1993 for nearly $ 100 million, was only $ 10 million in revenue. They are given in mass groups.
8. Maintain talent
When you buy a technology company, you must try to maintain the talent – especially its founders, its emotional leaders and engineers.
You understand `The leaders' currency& # 39;: Track record, trust and relationships. And therefore Engage your HR team To answer basic questions and help identify attractive career paths within your organization for acquired teams. If you fail to do so, people will Leave or Performance, And will not get the new products you hope.
At Cisco, about a third of the top leadership came from internal promotions, 1/3 from recruitment and 1/3 from acquisitions. At the top there was probably about 100 former CEOs on the payroll!
9. Expect some failure
Despite its stellar record, nearly a third of Cisco devices were failures. The reasons may vary, some of which may be due to market changes. When I decided Flip Video closed within two years after the acquisition of $ 590 million: Apple has just added a video cloud capabilities, it was more than a game.
Expect them, learn from them, and Be prepared to cut losses Ideally, republish people.
10. In the future, mergers and acquisitions may not be sufficient
With the pace of innovation accelerating, and the best emerging companies joining emerging companies rather than large companies, emerging companies may become threats faster than the possibility of being purchased.
Chambers suggested that Next level skill To develop the ability to Formation of strategic partnerships very early with emerging companies, Such as the latter JV-Boeing and AI 5-year-olds are much smaller startup SparkCognitionAir traffic in urban areas.
Thanks to the speakers, participants and supporters of this series Masterclass, in particular: Natasha Legay (Logitech), Todd Neville (IBM), Christina Lamontan(Johnson & Johnson), Anne Samak de la Cerda (Former CFO, Love), Dan Fairfax, (Former CFO, Brocade), Amanda Zamors And Larry Zhou (Goodwin), Kate Whitcomb And Ethan Hai (HAX).