Thursday, July 12, 2012

Apple Acquisitions

Apple acquisitions since 2001
By my count, to date Apple has made 20 company acquisitions since 2001. Apple is somewhat secretive about its M&A activity, so some digging is required to get to 20. Capital IQ (an authoritative deal source) lists only 16 company acquisitions for Apple during this period.

Apple has not been a particularly acquisitive company over this 12 year period. In contrast, Google acquired about twice as many companies in the year 2011 alone.

The infographic on the right depicts these 20 acquisitions, clustering the deals by market segment. You can view much more detail at Apple acquisitions since 2001.

Three clusters stand out: 1) Media application software (Spruce, EMAGIC, Silicon Color, Proximity and Redmatica). The most recent deal (Redmatica) develops applications used for sampling and editing audio files and for managing audio libraries; 2) Semiconductors (P.A. Semi, Intrinsity and Anobit). The most recent deal (Anobit) makes a key component that improves the performance of NAND flash memory chips, which are used in products such as iPhones, iPads, and iPods; 3) Mapping, imaging, drawing (Placebase, Poly9, Imsense, C3 Technologies). The most recent deal (C3) is a developer of three-dimensional mapping technology and now operates as the "Sputnik" division of Apple. This latter cluster of deals was particularly important as Apple moved away from using Google Maps in its new iOS 6.

Curiously, Redmatica (Italy), Anobit (Israel), and C3 Technologies (Sweden) were all headquartered outside of the US. Apple's M&A reach clearly has a global perspective.

Sunday, May 20, 2012

M&A Ecosystem Synergy: Much More than Sum of Parts

We’ve heard about M&A synergy, the notion (all too often fanciful) that the value of combined enterprises will exceed the sum of their individual values. Revenue synergies are anticipated top-line enhancements that will come from use of the acquirer’s superior distribution capability, or cross-selling of companies’ products, or effective integration across an industry value chain. Or, or, or… The list of possible revenue synergies is long.  Sometimes such synergies are real; often they are optimistically imaginative.

Cost synergies (such as head-count reduction from redundant overhead) are more in control of the acquirer. And these synergies tend to be more believable by Wall Street.

In any case, synergy can be represented by the equation V(A + T) > V(A) + V(T), where V(A) is the value of the Acquirer and V(T) is the value of the Target.

But consider what can be a potentially richer form of M&A synergy. Research findings suggest that initiation of a series of acquisitions as part of a strategic M&A program is associated with value creation for buyers. I believe this is especially true where ecosystem synergy can be realized.
Ecosystem synergy exists where target acquisitions have synergy with each other and not only with the acquirer. In other words, V(A + T1+ T2) > V(A+T1) + V(A+T2), where A stands for the Acquirer, and T1 and T2 stand for distinct Targets that have synergies with each other in addition to potential synergies with Acquirer.

Consider an example. Google has engaged in a series of advertising-related acquisitions that have helped the company cover the entire value chain of advertising. These acquisitions include Invite Media, DoubleClick, Admeld, and AdMob.

In the Internet world, ads typically start with the advertiser and go through an ad agency to a demand side platform (Invite Media), then to ad exchange (DoubleClick), then to supply side platform (Admeld), finally reaching users through services such as YouTube. In addition, the AdMob acquisition gives Google one of the largest mobile advertising networks. Google plans to integrate the AdMob network with DoubleClick's ad tools to ultimately operate a single platform across multiple devices. This is an excellent example of ecosystem synergy -- where target acquisitions enjoy synergy with each other and not only with the acquirer.

For more information on this constellation of deals, see

Research support provided by Debadutta Bhattacharyya and Ahreum Hong.

Thursday, May 17, 2012

Starbucks M&A in China: from Forbidden to Far and Wide

Starbucks entered China in 1999 and quickly opened a café within the Forbidden City. Chinese were horrified at the image of a U.S. coffee capitalist encroaching on traditional Chinese culture. The site became a lightning rod for controversy and eventually closed.

But Starbucks was sharpening its China vision, focusing on the development of goodwill, brand awareness and strong government relations. Consider a couple of recent moves. In February 2012, Starbucks established a joint venture with the Ai Ni Group, one of Yunnan Province’s most established agricultural companies and coffee operators. The goal is to support local farmers and help them enhance the quality of coffee that can be served within China. And in April, China Starbucks University was created, aiming to “elevate” the company’s China employees, with the noble goal of making Starbucks an employer of choice.
Starbucks intends to make China its second largest market (after the U.S.) by 2014 and plans over 1500 cafés in the country by 2015. There are at present about 600 Starbucks stores in China. The company is currently adding a store about every four days and plans to accelerate this pace.
Given this growth goal, corporate business development is changing in China. Originally, Starbucks entered China largely through minority share licensing agreements or joint ventures with quality corporate partners. Now the company is buying out partners such as Maxim Caterers in areas where Starbucks wants to accelerate growth. Starbucks will have full ownership of cafés in the provinces of Guangdong, Hainan, Sichuan, Shaanxi and Hubei, as well as the province-level municipality of Chongqing. Central, South and Western China is coming under full control of the company.
Starbucks intends to move from forbidden to far and wide.
Research assistance provided by Gaurav Vij

Saturday, April 7, 2012

Google's Major Acquisitions

Google's has done over 100 acquisitions over the past ten years. So which deals should we classify as significant? The largest deal by far (Motorola Mobility) involves consideration of about $12.5 billion. (This deal has been approved by U.S and EU antitrust authorities, but is still pending regulatory clearance is China, Taiwan and Israel.) The acquisition of Motorola Mobility is expected to substantially augment Google’s thin patent portfolio of about 2,000 patents, increasing it to 20,000+.

But size of transaction alone does not determine significance. Consider Google's 2005 purchase of Android, rumored to cost a mere $50 million. Android has driven quick adoption of Google's mobile platform, which has augured well for company's broader ad-based business model.

For our take on Google's most significant acquisitions, see the infographic at This visual is destined for change as Google's corporate acquisition machine continues its march forward.