Technological acquisitions

Business Center of a Hotel in Hong Kong. Photo Credit: Wikimedia commons
Business Center of a Hotel in Hong Kong. Photo Credit: Wikimedia commons

Technology has an important effect on several managing areas related to manufacture: cost, quality, time to market, and functionality. That implies that technology drives different marketing strategies of price and performance.

Innovation in the process technology can let to make products in a more cheaply way. Quality, that can be defined as the ability to manufacture better products at a certain given cost, can be improved too. Time to market can be improved through innovation because the ability to put new products into the market can increase.  Functionality is improved related to management because the organization can make more flexible. It can match higher product volumes, different attributes, and it can fit better demand if technology let to change production process easily with no cost.

When we want to determine the value of a company we must analyze its process technology and how it is improving those four aspects of the production process.

The value of a company is many times defined by its market volume; however, it is not useful for investors searching for bargains because sometimes companies are bought to get a benefit from a certain technology changing the managing process. Sales volume is linked to many other things far from technology, as day by day management, strategy, political environment. A good business opportunity for many investors is to get a company with good process technology and to change the managing process. That is the reason why companies without higher sales can be sold for a huge amount of money. The buyer can impose a different managing way, and it can have different political environment if it is a foreign company from a country with lower taxes and less barriers for businesses, for instance.

In an acquisition of a company, an important thing can be to find a cheap company that do not work well although its technological value is higher because of the management process or the political environment, and finally to turn it into an expensive company that nobody will be interesting in acquiring, changing the managing process and/or its political environment.

Businesses related to IT technologies are businesses that can be moved easily from a country to another one. This kind of businesses is much appropriated to be seen as a bargain, because as any business sold finally they will have a different managing staff with a different managing process and it is very easy to change the political environment for them if it is a huge barrier to develop all the potential of the business because both the production process and the market can be moved from a country to a different one in a different way if it is required.

For this kind of business, buyers always are interested only in the actual potential value of the technology that must be analyzed in terms of cost, quality, time to market and functionality, setting aside other aspects as political environment.

Investors usually say that good businesses never can be bought because they never are sold. A bargain is always a bad business with a good technological process or, following the previous discussion, a good business with a bad management process or in a bad political environment.

Technology companies are usually started with a technological entrepreneur without managing abilities, but there can be other companies with good managers that cannot reach all its full potential due to the political environment. These are better bargains because you will not need to make additional investments in improving management. You will only need to move the business from a country or region with a lot of barriers for startups to a place with fewer barriers to innovation, and with internet, this does not need to be done physically many times.


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