4 Reasons to Consider a Techquisition

August 25, 2016

Contributor: Kasey Panetta

How Under Armour, Fossil Group, Monsanto and Generali Group use techquisitions to accelerate their digital business.

While there are many different reasons for a company to undertake a techquisition, Under Armour, a leading U.S. sports apparel company, had a very specific goal in mind.

CEO Kevin Plank recognized that people who wear and use activity trackers to monitor biometric data and share that information with a community of like-minded people are more likely to work out than people who don’t. Because these people work out more, they are also more likely to purchase sports apparel or footwear.

With that in mind, Plank decided to acquire several digital fitness and nutritional tracking platforms. These techquisitions gave Under Armour immediate access to more than 120 million app users and potential sports apparel customers.

“The defining characteristic of a techquisition is the acquirer's goal to substantially transform their conventional, nondigital business model by acquiring new capabilities of a digital-born target and, in some cases, even change the rules of play for its industry,” said Ansgar Schulte, research director at Gartner.

Although companies may recognize the need for a more aggressive digital business approach, creating those digital capabilities internally often takes too long; acquiring a smaller, more advanced company enables the traditional player to move forward more quickly.

Under Armour increases digital sales and marketing

In the case of Under Armour, the CEO recognized that purchasing the fitness and nutrition tracking platforms would allow for stronger sales and digital marketing, as well as future, “smart” product design. This techquisition was made to rapidly expand and digitalize sales and other customer-facing activities and leverage the connected social media capabilities of the targets.

Monsanto expands the value chain

In some cases companies perform techquisitions with the goal of expanding the current enterprise value chain to attract new customers or business partners. Monsanto, a multinational agriculture products manufacturer, added greater value to its traditional offerings when it acquired The Climate Corporation, a weather-monitoring analytics software and agronomic-data-modeling firm.

The Climate Corporation offers software-based advice that helps farmers make decisions about planting and harvesting. With this acquisition, Monsanto was able to add value to current customer offerings and better serve the broader needs of future farmers.

Fossil Group acquires scarce talent

Occasionally, techquisitions aren’t really about acquiring a digital platform but rather about acquiring the people who created a successful digital platform, also known as acqui-hiring. Top digital talent is increasingly scarce, but also increasingly necessary. Acqui-hiring is most common in the banking and financial services industry, but is also happening in other very traditional industries.

Fossil Group, a U.S.-based watchmaker, recently acquired Misfit, a maker of wearable fitness trackers. This techquisition enabled Fossil to quickly enter the high-growth connected watches and wearable devices market by leveraging Misfit’s top engineering talent.

Read moreAcquiring Top Talent for Digital Business

Generali Group monetizes customer insight

Techquisitions also occur when companies are looking for more information about customers in order to create new business opportunities. In these cases, the acquired companies provide the traditional player with advanced technologies to collect and mine data about how customers use their products or services.

Generali Group, one of the largest car insurance groups in Europe, recently acquired MyDrive Solutions, a sensor and data analytics company, to enable the company to tailor car insurance premiums to customer driving styles. The real-time data collected by smart sensors about speed, hours and location, as well as driving habits like braking or swerving, allow the insurance company to offer safer drivers lower premiums while increasing the rates of drivers who exhibit riskier behaviors.

While techquisitions happen for many different reasons, each one adds some unique, digital capabilities to the larger company, said Mr. Schulte. Unlike traditional mergers and acquisitions, where the goal is cost and asset optimization after acquiring another company, techquisitions should focus on preserving the differentiating assets of the acquired company and protect its value-driving innovation.

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