Merits and demerits of Symantec's approach to acquiring entrepreneurial companies

Symantec Entrepreneurial Acquisitions

An Evaluation of the Symantec Company Strategy of Acquiring Smaller Entrepreneurial Innovators

Evaluate the merits & demerits of Symantec's approach to acquiring entrepreneurial companies.

There are many approaches to Symantec's style of acquisitions and this strategy led to a significant portion of the company's success in the mid to late 90's. The company employed an acquisition team that was cross-functional in composition and was sized according to what stage the acquisition was in. The acquisition team members would perform their normal tasks as well as the responsibilities that were demand by the project acquisition. The composition of cross-functional teams has been shown to be an invaluable asset in regards to overcoming spatial and organizational barriers in the acquisition process; especially when technical elements are involved (Love & Roper, 2008).

Entrepreneurial acquisitions of small but growing high technology companies also stand the potential to create value for both organizations. The smaller but growing firms often do not have the internal capabilities to further grow their product lineups. For example, a smaller firm who has successfully exploited a technology opportunity may not possess a dedicated marketing team to help promote their products. They might also not possess adequate administrative roles to keep pace with the transactional requirements of growth. However, the larger firms generally have many competencies in these areas and larger organizations with more experience in acquisition increase the chances of success (Laamanen & Kell, 2008).

A larger firm, such as Symantec, has a great deal to gain through entrepreneurial acquisitions. One benefit to the acquiring company is that they can save in risky and expensive internal research and development. Instead, they simply purchase new technologies that have already been successful in the market. Symantec has used this approach to enter market niches such as desktop productivity, communication tools, programming development tools, and utilities such as network managers, virus checkers, and remote management products. They are able to use their experience and resources to combined products and processes that are comparable to create synergies in the two organizations.

Despite all of the potential benefits that a larger firm can through this acquisition strategy, there are equally a large number of risks and uncertainties that can cause both organizations havoc. In the case of Symantec, the case outlines three categories of risk that the organization considers at various levels in the deal. The three categories consist of market risk, product risk, and people risk. In the technology sector, the market moves incredibly fast and there is always a risk of obsolescence that can loom at every corner. Product risk refers to the combined company being able to successfully create products that function effectively. Finally, people risk is most likely the most potent risk of the three. Even if the first two risks are successfully mitigated, then there is always the risk that the two organizations cannot form a functioning unit because of cultural or interpersonal differences.

Question2. Consider various steps of the acquisition process

Symantec has compiled there acquisition experience into a model that includes three separate phases of the acquisition process:

Phase 1: Prospecting -- "deal desirability and feasibility review"

In this phase the company does the exploratory work to see if the deal is desirable and/or feasible. The case mentions that at any given year, the Symantec organization will look into roughly three hundred fifty different deals; or approximately one per day.

These potential deals range significantly in size and scope and the team size and composition is adjusted accordingly. Furthermore, the business develop team has two to ten deals being scrutinized for further consideration at any one time. Although this activity is still considered to be under the same category, these deals are examined with increased scrutiny; Symantec refers to deals at this stage as "pots on the fire." If a ten to twenty person team decides that the pot on the fire has scored favorably enough on all of the internal analyses, then it is funnel into the next phase.

Phase 2: Scrubbing -- "detailed due diligence and announcement preparation"

In this phase, the level of investigation is accelerated rapidly. The project team grows substantially from the ten to twenty members to a team consisting of roughly fifty to seventy five members. This team's composition is made up of representatives from nearly all functional areas of the business including manufacturing, customer support, sales, marketing, MIS, etc. Each of the representatives in the business functions have a well-defined list of objectives that they have to oversee in advance to ensure that the project can move onto the next phase.

Phase 3: Integration -- "building of working relationships"

Again, in this phase, the project's attention is accelerated thoroughly. The team size is again doubled, from fifty to seventy five to one hundred fifty. The team is primarily responsible for getting the new division of the organization acclimated to their new roles. The team also acts as a liaison between the parent company and the acquired subsidiary. Not only do they teach the new members about the parent company's strategy and mission, but they also cover tactile issues such as public relations, launch timetables, and product packaging.