Are you looking to specify or diversify?
For companies involved in a merger or acquisition, two equally important but somewhat competing goals can drive the deal. One of them is diversification, or broadening business models to include new focuses, markets and operations. The other is specification, or narrowing the attention of a business to a specific set of objectives.
"These two conflicting goals have been used to describe thousands of M&A transactions," explains the finance site. "A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of a particular industry's performance on its profitability. Companies seeking to sharpen focus often merge with companies that have deeper market penetration in a key area of operations."
Diversification can lead to new revenue streams, lateral approaches to development and other benefits that come about from omnichannel corporate structure. A product with little visibility can be leveraged across every facet of the larger business' operations. This can be attractive to companies looking to increase scale and ramp up exposure.
For companies looking to specify, perhaps a firm has developed a social platform or open-sourced program that needs a more practical application. In this sense, yielding that development to a single company's offerings can clarify the purpose and application of a product. Search engine technology, for example, could be applied to an ecommerce site's discovery feature. Even if that wasn't the original goal for application, it can be lucrative and rewarding to specify.
Whether your company's goal is to specify or diversify, a merger or acquisition might be the best course of action. Working with an experienced M&A advisor can help entrepreneurs arrive at the best decision to achieve the long-range goals of your tech company.