The Big Takeover — Why big companies buy little ones
Quite often tech giants such as google will buy companies, even startups who have shown potential. We are only 6 months into 2015 and google so far has acquired seven companies in 2015! Here are a few reasons the big guys might want to buy you out ;)
Talent
One major reason is for the acquisition of the talent that smaller companies might have. This tactic also know as acqui-hires can be cheaper and more convenient for companies to acquire a full team rather than build one from scratch.
Our investment syndicate on AngelList cites this as a major factor when investing in startups, talent is a rare commodity and its the people that make the product great! Have a look around here.
Example: Little Eye Labs
Little eye labs, an Indian startup that has developed a tool to analyse the performance of Android apps has come under the umbrella of Facebook in 2014. A statement on the company’s site indicated that “With this acquisition, Little Eye Labs will join forces with Facebook to take its mobile development to the next level! This is Facebook’s first acquisition of an Indian company, and we are happy to become part of such an incredible team,” the whole team got packed up and shipped to Facebook’s headquarters in America.
Expand their product line
A company might want to add an additional feature or product line to their current offer. If your company offers the solution they are looking for, it might be cheaper to acquire a whole company rather than start from scratch and implement it on there time.
Technology
Some smaller firms manage to develop some incredible technology that other companies might consider worth having. Buying smaller companies with technology that can enhance their value proposition or differentiate them from their competitors has become an ongoing hunt from bigger companies.
Example: Face.com
Facebook aquired Israeli startup Face.com that provided a facial recognititon technology. The technology allowed facebook user to tag their friends and essentially share social events through photos with each other. The software would then suggest friends that might be in future uploaded pictures.
New Marketplace
Some companies will buy others in order to acquire their route to market and increase their reach further.
Eliminate Competitors
One last major reason for companies to acquire another, is to eliminate competitors and increase their market share through the acquisition of competitors.
