OneThird of Google's Acquisitions Have Failed: Is That the Good News or the Bad News?

The news that one third of Google's acquisitions had failed was interesting. But probably not for the reason that many observers think.

The good news, of course, is that this means two thirds succeeded. However one chooses to interpret the information, that looks like a positive percentage. Perspective is difficult, however, without context. In light of the announcement that the Motorola deal is very near approval, a key to Google's mobile strategy, assessing the company's acquisition performance is timely.

What makes this potentially noteworthy is that research on corporate mergers and acquisitions has consistently determined, over a lengthy period of time, that they fail 66% of the time.

So Google, it would seem, is doing better than the business average. Which is what one would expect from an especially focused organization with notably intelligent employees. The question that should be asked is whether those acquisitions have added value in the ways the acquirer anticipated when it made the decision. Or whether the price expended is justified by the subsequent contribution of the target and its employees. It would also be useful to know where there has been a pattern to the failure. Are the acquisitions that failed of a certain size, are they in specific sectors, do they have other characteristics that can be categorized?

'Failed' is a non-specific term unless the parameters of that failure are defined. What we have learned, so far, is that Google is not perfect. Whether that lack of perfection becomes a serious competitive disadvantage will emerge over time. But understanding how these activities compare to the experience of others as well as how they compare to Google's own expectations will tell investors, clients, business partners and employees a lot more about strategy execution and its future impact. JL

Sean Ludwig reports in Venture Beat:

Google Vice President David Lawee said today that two-thirds of Google’s acquisitions over the years have been successful, an important statement following the close of its $12.5 billion Motorola buy this week.
Lawee was being interviewed on stage by CrunchFund partner MG Siegler today at the TechCrunch Disrupt event in New York. The two talked about Motorola, several of the company’s acquisitions over the years, and how Google approaches folding entrepreneurs into its corporate stronghold.

Since 2008, Lawee has been in charge of corporate development and Google’s mergers & acquisitions group, so he has a wide overview of what’s gone down the past several years. Google has acquired more than 100 companies since 2001.

On the topic of Motorola, Lawee surprisingly didn’t say too much, but seemed optimistic about the company’s future with Googler Dennis Woodside at the helm. Notably, Motorola will maintain its own mergers and acquisitions division if it needs to acquire key players to expand.

He cited DoubleClick and AdMob to two of Google’s most successful acquisitions. Lawee didn’t define exactly what measured the successes of each buy, but said you could look at each company on its own terms to see what they have accomplished since their acquisitions.

But Slide, he admitted, belonged to the “one-third” of the company’s failures. Lawee said that it was indicative of Google changing strategies before an acquisition could be completed. “Sometimes executing on strategy leads other things to fail,” he said. “85 percent of that team ended up working for YouTube and they’ve done quite well there.”

As for working for CEO Larry Page, Lawee said times at the company have changed a lot. As much as the press documents Page’s changes to make the company more focused on core products and social integration, Lawee said seeing the changes internally have been stark.

“It’s easy to underestimate the impact,” Lawee said. “We’re making bold bets on what will be important in two to five years. We’re trying to deliver on that vision.”

One of the last topics that came up with Kevin Rose’s latest startup Milk, which Google recently bought for its team and shut down the product. He said it was a bit usual for Google to “acqui-hire”. Usually Google buys a company for the tech and hopes its team will do big things when they become part of Google.

“We expect that 90 percent of what they create will come after being hired by us,” Lawee said.