How do big companies like Google, Microsoft and Apple design their acquisition strategy for the companies they buy?

All they do is simple.

Predict the Future.

Their Acquisition was based simply on strong strategies based on future.

Eg. Facebook's Acquisition of WhatsApp.
Facebook found that, WhatsApp gained more poplar than fb.If they have let it just like that, Facebook would have faced the same thing what ORKUT faced.
They created a hype in the minds of public about the acquisition, even before few weeks of buying. Then they followed the same steps,
  • They made their facebook app to get some more permissions to their text messages too.
  • This made people to use other services for messaging.
  • Even LINE messaging app got 2 million extra users because of this, other than BBM, viber, HIKE, etc.
  • Since WhatsApp was the hot topic at that time, people started using WhatsApp and they reached extra 100 million users in no time.

 This is just an example. The same strategy continues, the method alone changes. :)
Acquisition strategies vary by the size (Billions vs. Millions) of the company.

For large acquisitions costing significant money (say WhatsApp for Facebook), it usually driven from the very top. These are driven by disruptive forces that are probably out of control from the acquiring company. In case of WhatsApp, it was growing at extremely high rate and Facebook wanted to get that user base. Why WhatsApp instead of a company like Viber is a more complicated question. One could use more quantitative metrics like user growth, possible revenue, people talent etc.

Smaller acquisitions may be driven by a specific champion (a VP or GM) within the acquiring company. In this case, apart from disruptive forces, the acquiring company (or more appropriately the champion within the company) may see

  1. Value in bolstering their existing portfolio
  2. Losing sales to competition and fearing losing of market share
  3. Internal teams competing with the target company not executing well or even some people leaving and joining competitors
  4. Value in bringing in talent from outside to quickly build an organization
  5. Threat of a competitor acquiring the target company and thus causing market share shifts. This is great for the target company as their valuation is going to increase, if two competitors want to acquire them.

Books can and are written on the subject of acquisitions; however, here are a few thoughts. It all depends on a plethora of significant considerations that are too voluminous to list here. Essentially, every acquisition is unique. In the end, most acquisitions utilize a combination of cash, debt and equity (possibly in the form of stock) arranged in a manner that minimizes the amount of taxes due to the government. Most acquisitions are a win-win situation.

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