Ask HN: Costs of acquiring a company?

2 points by fizzyfizz 10 years ago | 2 comments

My company is considering acquiring another company.

One of the people tasked with deciding this seems to have no concept of integration costs. He thinks that we just grow our team by 2x and then we're 2x more productive. Even though their technology stack is on JVM languages, and ours is Python-based.

My experience is that this is totally underestimating the costs of integration, but are there studies to back this up?

(Let's set aside the coordination costs of a larger team -- we can refer to the Mythical Man-Month for that).

mswen 10 years ago |

The integration issues will clearly be very different if the engineering/programming teams will be co-mingled and working on the same product. If they will be combined to work on a single unified product then you are right there will be significant integration costs.

On the other hand if you are buying a company with a product that will continue and the "integration" is at a higher level of abstraction the integration might not be so bad. Support each product on their own stack and integrate at the API level.

gravypod 10 years ago |

The largest cost stems from taking someone else's "baby" away from them. The truth is if you can make the other CEO understand that their company is only worth as much as someone is willing to pay.

If they are leaking money, if they have no clients, if they cannot capitalize know their invention: let them no and tell them that you are the only way out.

It might not be true, but if you don't want to spend way more then what it's worth, you will need to tell them.