In the ever changing IT landscape, companies are constantly adapting to keep up with the times. One common way to do so is through acquisitions and mergers. Many businesses were born out of the combination of multiple entities, but those buyouts come with a high price tag as well as high risk. Let’s dive into a few of the most notable mergers of the past several years.
Microsoft & LinkedIn: June 2016, $26.2 billion
On its announcement, the reasons behind Microsoft’s LinkedIn acquisition were mysterious. The social-networking site for professional connections had seemingly nothing to do with a software giant such as Microsoft. Before the acquisition, Microsoft was in a downward spiral. It had made a series of mistakes that left it in poor social standing with the rest of Silicon Valley. The company, though powerful and advanced, had positioned itself as something of a lone wolf in a pack-like industry. It tended to avoid making important social connections—a grave mistake when many business deals occur over dinner, drinks and other social gatherings.
It wasn’t until Satya Nadella brought LinkedIn’s founder, Reid Hoffman, onto the Microsoft board of directors that the reason for the merger came into focus. The company was looking to make a comeback, and doing so required improving its reputation among its peers. By working with Hoffman, an active member of the IT world from the beginning, Microsoft effectively connected itself socially to the rest of Silicon Valley.
Not only did the company improve its social standing, but it also gained access to all the data in LinkedIn’s platform, as well as the ability to use that data as a tool for “social selling” and targeted marketing. The data alone may have been worth Microsoft’s investment; it may, however, take longer to see the full benefits of the acquisition. EMarketer Senior Analyst Jillian Ryan said, "I don't think we'll know for a couple years if this will really pay off, but the signs thus far are positive."
Oracle & NetSuite: July 2016, $9.3 billion
Oracle’s NetSuite buyout was unsurprising to the IT industry. It seemed like the most sensible step for both companies. Each one serves the cloud-computing, ERP and HCM markets—Oracle for enterprise-scale businesses and NetSuite for small to medium-size businesses. In buying NetSuite, Oracle broadened its reach to include SMBs.
“Oracle and NetSuite cloud applications are complementary and will coexist in the marketplace forever,” said Oracle CEO Mark Hurd. “We intend to invest heavily in both products — engineering and distribution.” Under Oracle’s ownership, NetSuite still operates as its own business and will continue to be run separately. Although the two businesses operate on the same general ideas, they can each focus on separate markets. This acquisition gave both entities the resources for financial stability and the ability to provide the best possible product.
Dell & EMC: September 2016, $67 billion
The Dell-EMC merger, which combined the former’s server, PC and mobile business with the latter’s enterprise storage capabilities, is the largest tech acquisition to date. According to CEO Michael Dell, the purchase of EMC was meant to “evolve the company into the most relevant areas where IT was going.”
Previously, EMC was a group of affiliated but often independent companies that operated under the same umbrella. It was the world’s largest provider of data-storage systems by market share. Dell, on the other hand, was a world leader in computer technology, taking charge of everything from selling essential tech products to revolutionizing supply-chain-management channels.
The two firms came together to form Dell EMC, a company whose mission is to “serve a key role in providing the essential infrastructure for organizations to build their digital future, transform IT and protect their most important asset, information.” That is, the company took the best from Dell and EMC and put them together to provide an all-encompassing solution for customers.
Verizon & Yahoo: June 2017, $4.5 billion
Everyone knows Yahoo as a major player of the early Internet days. It effectively set up email and search to enable the technology boom. But the company’s initial success was insufficient to sustain it through the post-2000 Internet era, and it struggled to keep up with the rest of the industry. A positive investment by CEO Marissa Mayer in Chinese e-commerce company Alibaba accounted for most of the company’s value and forced Mayer to sell and resign from her position. Aside from that investment, the core Internet business was worth little on its own. From its inception, Yahoo has constantly waffled between calling itself a media company and calling itself a software company—an identity crisis that eventually cost it big.
Verizon’s acquisition of the core business was a logical step following its similar 2015 buyout of AOL. Not only did it seem to save the companies from extinction, but it also allowed Verizon to gain much larger ad sales. Advertising companies prefer to make large one-time deals with big companies than more-numerous small deals with small companies. Verizon now has the ability to bid for itself, AOL and Yahoo all at once.
General Dynamics & CSRA: April 2018, $9.7 billion
General Dynamics and CSRA were previously separate IT-service providers to the U.S. government in national security, civil government, health care and public health. Their merger earlier this year created the largest government-IT provider by a longshot, beating its closest competition, Leidos, by $5.2 billion. The purchase of CSRA more than tripled General Dynamics’ impression across public safety and other civilian agencies.
“The combined CSRA and GDIT offers innovative, competitive and compelling solutions to our customers and provides attractive free cash flow coupled with good incremental return on capital for investors,” noted Phebe Novakovic, CEO of General Dynamics. “GDIT is positioned to deliver cost-effective, next-generation IT solutions and services to the Department of Defense, the intelligence community and federal civilian agencies as they modernize their information systems.”
About the Author
Amanda Peterson is with Enlightened Digital.