Reference no: EM133340060

With $70bn (£42bn, €53bn) in cash, there was speculation that Alphabet, formerly Google, might make a big acquisition, as shareholders would otherwise press for a special dividend or share repurchase. Prior to becoming Alphabet, Google had always been a serial acquirer with over 180 deals. Few were in excess of $1bn although the top ten cost more than $24.5bn in total. Many of Google's most wellknown products, including Android, YouTube, Maps, Docs and Analytics, came from acquisitions. Originally, Google did not set a priority on fit between its target companies and its own organisation. Acquisitions were simply ways to enter new markets, gain talent or give Google a stronger foothold where its own efforts had failed. For instance, acquiring YouTube came after Google Video stalled. Soon there were too many separate products, and CEO Larry Page reorganised into seven core product areas in 2011. There were fewer 'acquisition hires' and for a deal to complete it had to pass his 'toothbrush test' - a product you use daily to make your life better. A target must also enhance an existing product and be scalable. Most of Google's acquisitions had been start-ups. Retaining start-up founders can be very difficult as they think of themselves as entrepreneurs who like doing their own thing. Many acquirers have struggled to retain the expertise they have spent millions acquiring. However, Google has retained at least 221 start-up founders whilst closest competitor Yahoo retained only 110. Google competed with other potential purchasers on offering huge resources to founders to enable them to initiate their product visions faster. Founders were asked what their product would look like with a billion users? For instance, Keyhole's founders were asked to adapt their desktop digital mapping software for urban planning to work on the web. It became Google Maps - the world's largest source of location data. And Google would give entrepreneurs space to innovate, handle contracts, patents and intangibles. However, unless acquisitions were large, few continued to run independently. Often founders were rolled up inside another group in the company and they couldn't make decisions as freely as before. This affected their willingness to remain. When Google approached Tony Fadell, CEO of Nest, the maker of the learning thermostat, the question was how he wanted to spend his time. He had limited resources for expansion and was working always on managing the day-to-day. Google promised a big payday, retention of the Nest brand name, investment for expansion, and time to develop new products. Nest was acquired for $3.2bn to build Google's smart home initiative of connecting devices that anticipate human behaviour. Post-acquisition, Fadell didn't need formal approval for anything although he met regularly with Larry Page. Alphabet is facing multiple threats with declining share of desktop searches, Facebook taking advertising dollars and Amazon stealing product search queries in the mobile market. It needs new revenue sources to compete effectively and innovate continually - 'it can't all be from within'. Although skilled at acquiring small companies, Google had had less success with larger acquisitions as the biggest, Motorola Mobility, $12.5bn, failed and was later disposed of. With a new company structure of Alphabet as a holding company, and Google as a subsidiary, perhaps a new way of integrating larger acquisitions is possible that may be more appealing to potential targets.

Question

Using the post-acquisition integration matrix/strategy, compare Google's early acquisition management style with Nest's integration.