M&A in the German Startup Scene turned upside down

Olaf Jacobi
Jan 29, 2019 · 4 min read
Image for post
Image for post

German Tech Startups are bought

So far this story has mostly been told the other way around:

“US Tech company buys German start-up” or “US Tech company takes over German technology forge”. Europe and Israel were and still are a kind of grave table for US technology companies and grown-ups (more mature startups) to grow non-organically, to “eliminate” international competitors and to maintain and expand their own technological lead.

For most German technology start-ups, a trade-sale is the most common exit. We have seen IPOs less frequently since the year 2000 and if so, then in recent years it has been in particular ecommerce start-ups (Windeln.de, Westwing, Zalando, Home24) that have chosen the path to the stock exchange as an exit.

From seller to buyer

I try to describe it as simply as possible:

  • The big one buys the small one
  • The fast one grabs the slow one
  • German tech startups often have very good technology, but don’t manage to get big enough to be among the big and fast ones themselves
  • A company with a functioning and scalable sales organization can market additional products. These products do not always have to originate from a company’s own development

Companies such as Alphabet, Cisco, Oracle, Salesforce, etc. have more or less been practicing what German companies have missed over decades. Through strategic acquisitions, these companies further expand their market position, expand their product portfolio and thus secure their long-term survival.

What does it take to take over and integrate smaller tech start-ups?

Financial power

  • First and foremost, a company has to be able to afford it. The buyer needs the necessary financial power (cash) and flexibility
  • Often the purchase price is not only paid in cash, but the sellers also receive shares from the buying company. These shares must be “promising”, i.e. it should be foreseeable that the value of the shares will increase strongly in the future

Strategic and technical fit

  • There must be a strategic fit between the buying company and the M&A target. For example, complementary products, combinable technology, similar customers, complementary regional market coverage

Cultural fit

  • The buying company must be attractive to the founders, management and team of the company to be acquired. The corporate culture and the spirit in the team of the buying company are important factors here
  • The organization must be able to carry out post-merger integration. In particular, the management team must be able to execute an M&A transaction from start to finish

A good example from the German tech scene

Official press releases from Adjust:

https://www.adjust.com/blog/adjust-acquires-unbotify/

https://www.adjust.com/blog/adjust-acquires-acquiredio/

The fact that Adjust is a buyer is a clear sign of Adjust’s dominant position. The founders, management and the entire Adjust team have since its inception and the first seed financing round in April 2012 managed to become the technology leader and category leader in the Mobile Attribution and Measuring Market in recent years. Adjust has succeeded in establishing a globally functioning and scalable sales organization in its core market, which is in a position to market new additional products.

More to come?!

IMHO

Capnamic Ventures

Thoughts and insights from the Capnamic Ventures team

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch

Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore

Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store