May 18, 2009

Inside Microsoft’s M&A Strategy


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By Joseph Tartakoff - Sun 17 May 2009 06:11 PM PST

 

Here’s what the CFO of Microsoft (NSDQ: MSFT) says the company is looking for in an acquisition target: Companies that could bolster Microsoft’s position in categories that it is already a player in but does not dominate.

 

So don’t look for Microsoft to buy a company to get into the e-reader business since Microsoft doesn’t compete in that business—or at least that’s what the CFO, Chris Liddell (pictured, right), told Boston-area venture capitalists during a talk last week, according to Spark Capital general partner Bijan Sabet, who wrote about the meeting on his blog. Liddell’s criteria would also probably rule out an outright Twitter purchase, since Microsoft isn’t currently a player in the social-media space.

 

Of course, like most of its peers, Microsoft has not been buying much of anything as of late. Microsoft purchased only six companies during the first three quarters of the year, down from 15 during the same period a year ago (And Microsoft’s most recent purchase, game company BigPark, was conveniently started by the executive in charge of the company’s Xbox business).

 

Liddell said that the company believed most startups were too expensive. “Chris said they were on track to buy 20 companies last year but then the market crashed and they didn’t see anything they wanted to acquire given the valuation expectations,” writes Sabet. “He felt that valuations in the public markets had come down but private valuations hadn’t.”

 

The company’s recent decision to raise additional debt, though, has led to speculation that Microsoft is now on the lookout for a big buy. Liddell did not do much to dampen that notion at the meeting, stating that one reason the company was raising debt was that it wanted to increase its cash position in the United States since much of its liquidity right now is abroad.

Source: http://www.paidcontent.org/entry/419-how-microsoft-decides-to-buy-startups/

 

 

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