The biggest acquisition in technology
Previously in this series, we discussed Dell’s (DELL) offer to acquire EMC Corporation (EMC), in the biggest buyout to happen in the technology sector to date. The largest deal to make news previously was the Hewlett-Packard Company’s (HPQ) acquisition of Compaq in 2001. Facebook’s (FB) recent acquisition of Whatsapp in 2014 and Google’s (GOOG) acquisition of Motorola were some other notable acquisitions in the technology space.
Acquisitions despite difficult synergies
Previously in the series, we also discussed how the SMAC revolution is changing the IT (information technology) landscape. Technology players have been thus responding to this shift either through acquisitions or consolidation. However, if we look into past deals, especially in the technology space, it appears that it’s very difficult to attain associated cost efficiency and synergies between companies.
Hewlett-Packard, for example, had to wait for years to extract synergies from its $25 billion acquisition of Compaq. As it appears, the acquisition did a little to uplift HP’s prospects, as the company is now heading toward bifurcation.
The Symantec-Veritas deal is another example of how difficult it can be to create synergy after a merger or buyout. According to a Harvard Business Review paper published in 2011, “Study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%.”
You can consider investing in the SPDR S&P 500 (SPY) to gain exposure to the technology sector. The ETF invests about 18% of its holdings in the technology sector.
Read the next part of this series for more on EMC’s motives in the Dell buyout.