Acquisitions at Google Scale

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I have negotiated two successful acquisitions of startups by Google (Alphabet) as the lead negotiator and M&A advisor for the seller (Phatbits, Instantiations), and have been involved as in investor and/or board member with several others. Google has been a prolific acquirer, but their influence on M&A has extended beyond their four walls.  Senior M&A staff at Google have moved on to Linkedin, Groupon, Microsoft, and many other companies, where they applied lessons learned at Google.  Their approach reflects a set of goals that apply to many large companies, and it is useful to look at the world from their perspective.  Here are some of the criteria that I have seen:

1. The target company needs to fill a critical technology gap in a more efficient, cost-effective and timely way than building the technology, or, the target company has to have the potential of scaling up to Google scale (hundreds of millions + in revenue). These criteria knock out 90%+ of acquisition targets; very few companies have targeted a specific technology gap, or gone big and early in huge emerging market. There was a period of time when Google acquired lots of small companies and acted more like a VC than a strategic buyer. 5 or 6 years ago they shut down or open—sourced dozens of these acquisitions. The filter is stronger now.

2. The target company developer team has to be qualified to work at Google. The criteria is that in a standard interview process, ignoring the acquisition, they would be hired by Google.

3. The shareholders have to be willing to accept a clean sale that minimizes IP risk to Google.

4. In most cases, the employees have to accept some deferral of upside based on retention.

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