What Are Technology Acquisitions?

Technology mergers and acquisitions are mergers and acquisitions with the goal of obtaining the target's technical resources. After the technology merger, the acquirer acquires control of the target and can reintegrate the target's technology resources according to the enterprise development strategy.It is the most thorough form of technology transfer. Through technology mergers and acquisitions, technology resources outside the organization are transformed into technology resources inside the organization. Knowledge transfer at the technical level is an important aspect of Chinese companies' overseas mergers and acquisitions, and its success is related to the success or failure of mergers and acquisitions.

Technology M & A

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Under the influence of asset mergers and acquisitions worldwide. Domestic enterprises have continued to grow in order to improve the market competitiveness of their products and maintain economic benefits. Successive development strategies have been achieved through capital mergers and acquisitions. And technology as one of the means to achieve the development strategy of enterprises. Has played an important role in promoting the sustainable growth of enterprises. The technological advantage based on innovation has become a decisive factor affecting the market position and core competitiveness of enterprises.

Enterprise technology generally comes from internal research and development and external guidance. However, China's R & D level is lagging behind that of some developed countries. In order to meet the needs of international competition, domestic enterprises have begun to look for foreign high-tech technologies in foreign countries. Generally speaking. There are three main ways that companies seek technology introduction from abroad: technology purchases, technology alliances, and technology mergers and acquisitions. Long-term practice has proven that technology mergers and acquisitions have obvious advantages compared to technology purchases and technology alliances, which is more beneficial to the development of enterprises. As a result, more and more enterprises have begun to seek advanced technology through technology mergers and acquisitions.

It is undeniable that technology mergers and acquisitions do have such advantages, but at the same time. It also has relatively high requirements for mergers and acquisitions. Due to the late development of China's corporate mergers and acquisitions, the acquisition of intangible assets such as technology is more complicated than the acquisition of tangible assets. therefore. Many problems have emerged in the process of transnational technology mergers and acquisitions of Chinese enterprises.

l American Cisco Systems

Cisco Systems is a leading global provider of Internet equipment and solutions. Founded in 1984, it has taken just 13 years to become the fastest-growing company in the world. At the time of startup. Instead of spending huge sums of money to build a research and development team like other traditional companies, Cisco has formulated a strategy of rapid development and growth through mergers and acquisitions, and adopts the method of acquiring companies with advanced technologies to enhance its core competitiveness. To achieve the purpose of quickly grabbing market share and customer resources. Between 1993 and 2000. Cisco has acquired 71 small businesses that are growing. In 2000 alone, 23 companies were acquired and formed strategic alliances with many powerful IT companies. In 2004 and 2005. Cisco acquires 12 companies each year. So far Cisco has acquired more than 100 companies.

For so many mergers and acquisitions. Cisco has a consistent strategy: build new technologies through acquisitions and accelerate the pace of its product launches. And only those companies that they have the ability to acquire. These acquired companies are usually not too big. The ideal acquisition target is. The company has only about 100 people. Products are lT products. And the product technology is very new. Although, Cisco does not rule out that there are some large handwriting and special processing methods outside of small-scale acquisitions. But it still values small companies with special technologies. These companies are either directly in the same market as Cisco. Or close to Cisco products. After Cisco selected these acquisition targets. The most important factor that can ensure the success of mergers and acquisitions is integration. It includes how to receive the customers of the acquired company, how to integrate employees into a new team, how to integrate the corporate culture of both parties, and so on. The integration of the employees of the acquired company is a very important factor for Cisco. Provide better career opportunities for acquired employees. Rather than making employees of these companies marginalized or vulnerable. Research by two Stanford professors shows that most of Cisco's product line was created by engineers who joined Cisco after it acquired other small companies. In fact, Cisco's competitive advantage largely stems from the company's skills in retaining foreign talent from acquisitions. Generally speaking, Cisco's competitors have completed an acquisition. 40% to 80% of senior management and top engineers will leave. But at Cisco, that percentage is only 7%. It is not difficult to see that for Cisco. The key to integrating technology is to integrate talent. From the initial calculation of company size, personnel, and turnover, Cisco believes that the merger of a company at an average price of $ 500,000 to $ 3 million per person actually buys technology power and market share. This is an effective investment because While retaining the core employees of the merger and acquisition enterprise. It also reduced a group of potential competitors for itself. At the same time, through the acquisition of senior engineering and technical personnel and save investment in research and development. 70% of Cisco's products are developed by itself, and the other 30% are acquired through mergers.

2. China TCL Group

Unlike Cisco, which focuses on network products and services, TCL Group was founded in 1981 and has achieved rapid growth with a diversified development model. Its business involves four major industries including home appliances, information, communications, and electrical engineering. It integrates research, production and sales. . In September 2002, TCL Group acquired German Schneider Company, and acquired all production equipment, R & D facilities, sales channels, inventory and multiple brands related to Schneider. Relevant information shows that the acquisition has certain contingency, and the state government where Schneider is located has actively sought TCL International to invite the acquisition. In January 2003, TCL Group acquired French Thomson Company. The two sides jointly set up a TCI-Thomson joint venture to jointly develop, produce and sell color televisions and related products and services. Thomson is a major player in North America and Europe, with leading consumer product brands and a huge sales network. And has always been known for advanced research and development capabilities and the ability to supply major components. In October 2004, TCL Group joined hands with Alcatel mobile phones. This time, TCL fancy Alcatel's brand and sales network in the European market, as well as Alcatel's chip-level mobile phone research and development capabilities, and Alcatel's R & D strength in 3G is a global leader. In these three acquisitions, TCL Group hopes to reach the world-leading level in research and development technology and penetrate the international market through the sales channels of target companies.

But things went against expectations. TCL's three mergers and acquisitions were all unsatisfactory. After the three mergers and acquisitions, many problems have occurred, especially the most serious integration issues, such as incompatible corporate cultures, a large number of foreign R & D personnel and management staff leaving. What's more worth mentioning is that the 3G technology of Alcatel's mobile phones that has been favored has not been opened to TCL. The technologies involved in the agreement are 2G or 2.5G technologies. 3G technology belongs to another Alcatel joint venture. In addition, the three acquired companies are all serious loss-making companies. According to the TCL Group's 2006 interim report disclosed on August 30, 2006, the TCL Group achieved revenue of 23.576 billion yuan in main operations and a net profit of 738 million yuan during the reporting period. In this way, the direct result is that the R & D investment of Thomson and Alcatel will be reduced due to the huge financial pressure of losses. Directly affected TCL's own investment in research and development. The continuous weakening of the R & D system has greatly reduced the technology introduction effect of the original envisioned mergers and acquisitions. It will also affect the TCL Group's investment and mergers and acquisitions of high-end products such as LCD monitors that can really open the European and American markets.

3. Enlightenment after case comparison

(1) Before the implementation of mergers and acquisitions, companies need to clarify the purpose of mergers and acquisitions and make them consistent with the company's long-term development strategy

Cross-border mergers and acquisitions are an extremely complicated process, especially cross-border technological mergers and acquisitions. This process should be based on a solid strategic basis, taking into account all factors that may affect mergers and acquisitions and the outcome of mergers and acquisitions. Although TCL's acquisition of Schneider cannot be said to be a failed acquisition, for large companies such as TCL Group, it has not played a significant role in technological growth. The famous editor of the German Economic Weekly and economist Mr. Barron once commented on the acquisition of Schneider by TCL: "If you want to use Schneider to enter the German market, TCL might as well use its own brand. Because Schneider German social image in Germany is a conservative, continuously bankrupt and resold private company. The product is not as advanced as TCL. Now German TVs are very cheap and the market is saturated. If you buy them again, you can only buy high-end products, but the Germans know Schneider can't produce high-end products. If you sell the Schneider brand on TCL s ultra-thin high-end TV OEM label to Germany. Germans ca nt accept it. From the case of TCL, we can see that without strategy, blindly Carrying out cross-border mergers and acquisitions, or guiding mergers and acquisitions with the wrong strategy can only have a great impact on the development of enterprises. Therefore, before the implementation of cross-border mergers and acquisitions, companies must clarify the purpose of mergers and acquisitions. Examine whether M & A is in line with the company's future development strategy. It is the right thing to do after a detailed investigation.

(2) Select the appropriate acquisition target. Avoid neglecting the economic benefits of mergers and acquisitions by focusing on "big"

The economic benefits of mergers and acquisitions refer to the value added by mergers and acquisitions. The value added comes from the synergy effect of mergers and acquisitions. In the case of mergers and acquisitions, the costs and benefits of mergers and acquisitions should be fully considered. The ultimate purpose of introducing advanced technology and R & D teams for enterprises is to obtain benefits. M & A that ignores economic benefits and blindly seeks scale is a failure. From the selection of M & A objects by Cisco and TCL, it can be seen that there are obvious differences: Most of the objects that Cisco chooses are relatively small, new technology and good growth companies; while the companies selected by TCL are large Losing business. Although Schneider, Thomson, and Alcatel have better sales channels or equivalent market shares in developed western countries, which helps TCL expand its international business, it has had a negative effect on its benefit growth. In China, there are many cases of mergers and acquisitions similar to TCL. Most of their merger and acquisition targets are companies with poor foreign operating performance or even loss of business. Due to the company's loss or poor performance, it often leads to too little investment in product research and development. Therefore, M & A loss companies are acquired for technology. It's not wise, even if technology that requires M & A is urgently needed. It is also necessary to consider the possibility and difficulty of turning over the losses of the acquired company, or the long-term losses of its foreign business can only make Chinese companies carry heavy burdens.

(3) Pay attention to talents, and it is equally important to retain the talents of the merged and acquired enterprises as well as cultivate the enterprises' own talents.

For M & A with technology as the main goal, the value of the target company's technology is important. The loss of technical staff will naturally lead to an increase in the cost of understanding and using existing technologies. It also undermines the company's potential future value. The significance of retaining talent is clear from Cisco's case. But on the one hand, for Chinese companies. One of the costs that M & A foreign companies have to bear is the high labor force. To retain the original technical staff of the M & A enterprise will undoubtedly put heavy pressure on Zhongwei enterprises. On the other hand, if we rely entirely on the original technical team for further technology development, we will lose the original intention of using technology mergers and acquisitions to cultivate our own research and development capabilities. Therefore, for Chinese enterprises, in addition to retaining these talents, an important task is to focus on training their own development talents while retaining them. Cisco's example is worthy of our reference. At the same time, we need to take different measures to deal with talent issues according to specific situations.

(4) Strengthening risk awareness and minimizing risk on every joint of mergers and acquisitions

Corporate mergers and acquisitions are a specific risk-filled investment behavior, mainly including political and legal risks, decision-making risks, financial and financial risks, asset evaluation risks, technology risks, and integration risks. Compared with domestic mergers and acquisitions, cross-border mergers and acquisitions have more complicated operational procedures. More disturbed by uncertain factors. Practice has proved that the average success rate of general mergers and acquisitions is only 40%, and the success rate of cross-border mergers and acquisitions is only 20% -30%, and most Chinese companies have underestimated the risks of operating in global markets, which ultimately led to the failure of mergers and acquisitions. Therefore, to carry out cross-border mergers and acquisitions, we must first establish a mechanism to avoid cross-border mergers and acquisitions risks. Cisco has given us a good example in this regard: First, Cisco has a department dedicated to corporate mergers and acquisitions, and has cultivated a professional M & A team: second. Small-scale merger and acquisition goals are conducive to digestion and absorption, and can also reduce risks and ensure a high success rate. Third, Cisco will undergo a full investigation before the merger. Then specify a detailed merger and acquisition plan; finally, because Cisco merger and acquisition goals are to meet the needs of corporate development, and corporate culture and Cisco culture similar companies, greatly reduce the integration risk after mergers and acquisitions. It can be said that Cisco's prevention of M & A risks is reflected in every link, and minimizing every possible risk is the best control of risk.