Samsung trails Google in M&As
Samsung is following in Google’s footsteps with its mergers and acquisitions (M&A) strategy in a bid to develop new technologies and diverse new growth engines.
Simply put, the company has shifted its sights to buying small, technology-oriented firms for organic growth by copying from Google’s know-how on small deals. The U.S. firm’s M&A success rate is estimated at around 70 percent.
``Google’s M&A strategy is ideal as Samsung is now pursuing organic growth by acquiring small firms with patented technologies in select areas, not seeking just external growth by expanding its business size,’’ a Samsung official identified only as Park told The Korea Times.
Google signed 47 deals in 2010 and 79 in 2011. The largest acquisition was Motorola Mobility for $12.5 billion in August 2011.
``As expansion is no longer the key word for Samsung’s M&A strategy, we are focusing on smaller deals in strategic areas such as mobile, video, bio and even chip sectors. We need more patents in business areas that we’re already involved in or that we will be engaged in,’’ said the official, asking not to be identified.
Google is a well-known for acquiring small companies with low brand awareness but having patented technologies. The U.S. software giant has found new growth engines using its small deal strategy.
The world’s biggest smartphone maker, the strongest ally for Google’s Android operating system, said it is now in the middle of working-level discussions with the U.S. company on various issues. “Google gives advice and technical assistance on M&A strategies,” the Samsung official said.
As memory chips and flat screens ― which are highly volatile and cyclically dependent upon the macroeconomic situation ― are Samsung’s critical businesses, the Suwon-based outfit has not been aggressive in the global M&A market.
In 1994, Samsung bought U.S.-based PC manufacturer AST Research, the world’s sixth-biggest computer maker at that time, for $540 million. However, the acquisition failed to generate synergy because most research staff left AST.
Since 1994, Samsung has carried out just two acquisitions ― Israeli logic chip designer TransChip in 2007 and Poland’s Amica in 2009.
``Money is not an issue for Samsung but we don’t want to repeat the same failures. That’s why we are closely watching Google’s M&A strategy, which has been very successful. Google’s Motorola Mobility acquisition was a real shock. It motivated us to pursue more M&As for patents,’’ said the official.
The company hinted that it is willing to do more deals to acquire necessary technologies this year.
Samsung has ample cash to invest in both facilities and M&As. It had cash or cash equivalents of 37.45 trillion won at the end of the fourth quarter of last year, according to the company.
Samsung Electronics’ Investor Relations Office head Robert Yi said the company will spend more on research and development for more patents, raising the possibility that Samsung will strike more acquisitions this year.
It recently launched an Open Innovation Center and explained that it will entirely manage the firm’s acquisitions-related strategies.
Samsung recently bought 5 percent of Wacom, an attempt to equip its tablets and smartphones with a high-quality stylus.
Wacom specializes in interactive pen displays and digital drawing tablets.
Samsung’s 5 percent cost $58.2 million, allowing it to couple its styluses with devices like its Galaxy Notes.
