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Synergies in the Tech Acquisition Market

Apr 6, 2015

Some business owners know from the start that they want to grow a company for the sole purpose of selling it. Others start a business because they enjoy what they are doing and it’s a bonus when the company blossoms into something larger than expected. An acquisition for the latter type of business owner can be a challenge. Unlike a business that is simply sold and handed over, These owners might wish to stay with the company. They might also wish to maintain the corporate culture and original intent of the business they created.

There have been a lot of tech acquisitions in the past year and a few have something in common that answers the need of this type of entrepreneur – business synergy.  About a year ago, I wrote about WhatsApp Waiting for the Right Buyer and how some tech business owners want to hold out for ‘something more than money.’  This trend seems to be continuing and the Amazon acquisition of Twitch this past fall is no exception.

Twitch is a video service that allows users to stream live video game sessions and e-sports competitions to a world-wide audience. The company launched in June 2011 and just three years later was being courted by Google. Google, with its YouTube video streaming service, might have seemed like a good fit. But, possibly due to antitrust concerns, the deal did not go through. This paved the way for Amazon to ‘make its move’ with a Twitch purchase of approximately $970 million in cash.

Whereas Google might have absorbed Twitch in an acquisition, Amazon is a more complimentary fit. Amazon sells video games and has started creating their own original entertainment media that competes with Netflix, HBO and others. There appears to be a natural synergy between the two companies that Twitch’s CEO, Emmett Shear, sums up nicely in a letter to his Twitch community:  “We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch.”   

It might be tempting to take the first offer, but waiting could bring the right opportunity that’s an even better fit. If you’re a business owner who’s as lucky as WhatsApp and Twitch, maybe you really can wait to have your cake and eat it too.

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Marc Fogarty

Marc Fogarty, Audit Partner within Technology and Life Sciences Group, and member of the firm's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.

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