How tech companies should think about M&A
At the LAUNCH Scale conference in San Francisco, Samsung NEXT president David Eun sat down with entrepreneur and investor Jason Calcanis to talk about how our organization works with startups as they build, grow, and scale their operations.
Over the course of the interview, the subject of startup M&A came up, including AOL’s acquisition of Calcanis’ Weblogs, Inc. (Eun was at AOL’s then-parent company Time Warner at the time), Google’s acquisition of YouTube, and finally, Samsung’s acquisition of SmartThings. One of the main topics of that conversation was how to do M&A the right way — i.e. how to maximize the value of the asset being acquired.
When it comes to making sure acquisitions are successful, there are several factors to keep in mind, according to Eun. “It turns out there are obvious simple things, like retaining your identity and your culture, like keeping your email addresses and having your own space,” he said. At the same time, it’s important for the acquiring organization to understand what it’s buying and make sure not to ruin it in the integration process.
Eun gave the example of SmartThings, which Samsung bought back in 2014. When he met the team, SmartThings was a small startup that was founded on the idea of having one platform you could use to connect all the smart devices in your home. On the one hand, as part of the acquisition he wanted SmartThings to have access to all the different divisions within Samsung after the acquisition. But it was also important for the organization to remain independent and continue to foster its existing developer community.
Eun noted that today every division within Samsung is embracing the SmartThings brand, and it was a large part of the announcements made at the Samsung Developer Conference. But SmartThings continues to operate as an independent subsidiary within Samsung, with its own business operations. That has allowed it to continue to partner with other businesses like ADT, which recently announced co-branded security products with SmartThings.
“A lot of times the very thing that made the startup so successful and attractive in the first place is at risk of being watered down or just crushed,” Eun said. “If you look at the SmartThings example, we’ve taken pains to provide a bit of a buffer so they can continue to do the things that are important to them yet still leverage the large-scale resources of a company like [Samsung].”
Eun also believes that it’s important for entrepreneurs see an acquisition not as an end to itself, but as just one more step in their company’s journey.
“One of the things I’ve begun to appreciate is that an acquisition, while being an opportunity to celebrate the fruits of your labor, can really just be the next stage of your evolution,” he said. “It is finding a partner who can help super-charge the next phase of your growth and help take you to a further goal than getting acquired… If you think about acquisitions as a type of business development, if you can find the right acquirer, they will absolutely help you realize bigger dreams and bigger goals.”
Check out the video above for more insight into M&A best practices, as well as information about how Samsung NEXT operates and why we’re interested in transformative software and services startups.