Question

If a large tech/social media company (such as Google) was to make an acquisition of another company. What would the best options be?

Answer 1

If a company like Google is to acquire another company, they have to decide the company to be acquired based on the purpose of acquisition.

Acquisition is the process in which the acquiring company takes control of acquired company by purchasing its assets or majority of its shares. There are five types of acquisitions:

1. VALUE CREATION: in which you will acquire one company and work on the company to improve the performance and sell the company for profit.

In this case Google can acquire company of any industry in which they can improve the performance. Eg: any power generating company, auto manufacturing company etc in which they can designate management to work on.

2. CONSOLIDATIING : in which the company acquire another company to avoid competition.

Example Google can acquire Bing

3.ACCELERATING: in which a large company acquire a smaller company to develop the smaller companies product.

Example: Google is to acquire Fitbit, a smart watch making company which can be for the development of that particular Smartwatch.

4. RESOURCE ACQUIRING : in which the company acquire another company to gain resources.

Example: Google acquired Say Now for Google Voice.

5. SPECULATING: in which a larger company acquired a smaller company which is a new company with a new product with an object to encash the new product.

Example:Google can acquire any emerging company.

There is difference between merger and acquisitions.

Merger is the process of two or more companies joining together for a mutual benefit. Horizontal merger and vertical merger are two of the five types of merger.

1. Horizontal Merger: here companies in the same line of business merge together. This Merger can be between competitors. Horizontal merger is reward competition reduced cost and attain greater market share.

As Google is a search engine horizontal merger for Google is the acquisition of another search engine like Internet Explorer, Yahoo,  Mozilla Firefox.

2. Vertical Merger: in which two companies producing different products in the same supply chain merged together to increased efficiency.

Google merged with Motorola which is an android vendor.

Othrr types of mergers are:

3. Conglomerate Merger

4. Market extension Merger

5.Product extension Merger