Google reorganization may align with future M&A prospects
Yesterday, Google released the surprising and pivotal news that the company will be reorganized under a larger brand, to be called Alphabet. The tech giant, whose standalone logo and brand name have been ironed into the public consciousness over many years, said it decided to make the change so it could devote more management resources to enterprises other than the search and browsing services.
"Alphabet is mostly a collection of companies," wrote CEO Larry Page in a blog post. "The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity)."
Some experts speculated that the shift came due to pressure from shareholders who believed the diversification of Google in recent years may detract from the energy and attention devoted to bread-and-butter services like internet search. Of course, we all remember Google in the early days, primarily as a search engine. Over the years, Google has expanded into other areas of research and development for a host of web and tech innovations.
"Google has come under pressure as its founders have used the enormous success of its search engine to fuel riskier bets on autonomous cars, smart household devices, internet-delivering balloons and cutting-edge medical research," write Dominic Rushe and Sam Thielman of The Guardian. "The major restructuring will ostensibly give investors greater insight into how the money is being spent."
The creation of Alphabet as a holding company should give Google insiders more freedom to explore those other tech avenues, while debuting a "slimmed down" version of the company, Google, which currently plays host to them all. By spinning off individual initiatives under the umbrella of Alphabet, Google can remain focused on its primary mission while "siblings" can pursue the specific and diverse goals they're tasked with. Much of current Google leadership will shift to positions at Alphabet, a perch from which they'll oversee creation across various brands held under the parent company.
Google has come to prominence as one of the most sought-after parent companies for startups looking to sell. The creation of Alphabet provides Google leadership with more liberty to take those risks, piloting projects that haven't always been successful. Google Glass and Google Plus, for example, are offshoots of the original Google brand that have failed to live up to the expectations set in their inauguration.
"We've long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes," continued Page in his post. "But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant."
All in all, the step is a bold but perhaps necessary one to accomplish the work Google does outside of its primary service as a search engine.
If your company is seeking a merger or acquisition deal that achieves growth objectives, an M&A advisor can help guide you through the process. Whether it's finding, negotiating or completing a merger or acquisition, the support of an advisor can make the experience easier.