Consolidation in the Cloud: Some Factors to Make Your Company an Attractive Target

Winthrop & Weinstine, P.A.
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Verizon Communications Inc.’s recent acquisition of cloud-computing company Terremark Worldwide Inc. caused some analysts to speculate that there may be more consolidation in the cloud-computing industry. Consolidation in the cloud-computing industry would not be surprising since, according to Gartner’s Hype Cycle, cloud computing is at the top. This means there are many market participants in the cloud-computing industry.

If you're a market participant in the cloud-computing industry and your company’s exit strategy is to be acquired, what should you be doing to standout from the crowd? Generally, technology acquisitions fall into three categories: (1) Talent or Technology; (2) Product; and (3) Business. Likewise, there are different categories of buyers: (1) Bargain hunters; (2) Financial buyers; (3) Corporate and Industry buyers; and (4) Strategic or Synergistic buyers. Each category of buyer has its own acquisition objective.

A company in the cloud-computing industry is most likely to be acquired for its product by a Corporate or Industry buyer that wants to add capacity or products to its business. Corporate and Industry buyers tend to consider valuation approaches based upon future earnings and market comparables. The list below includes some focal points for a company to consider that will help increase valuation of the company to a Corporate or Industry buyer...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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