Apple’s approach to acquisitions focuses on smaller companies rather than deals with big names, as detailed in a new report of CNBC.
First, Apple evaluates acquisition targets starting from number of engineers that that operation can guarantee. While big-name transactions get headlines, Apple differs from its direct competitors because it prefers to make smaller acquisitions.
As mentioned before, Apple’s main purpose is to bring the technical staff from startups to the company and other small businesses acquired. In addition, the report shows that Apple values companies based on the number of engineers present and how quickly it can integrate those employees into their teams.
“We’ve seen companies like Google, Facebook, Intel, and Amazon doing multi-billion dollar dealsObserves GlobalData analyst Nicklas Nilsson. “Apple is buying smaller startups while others are spending more on established gamers“. That’s not to say Apple is avoiding major acquisitions, as evidenced by the $ 1 billion deal concluded in 2019 to buy Intel’s modem business.
Looking at the data, it also turns out that Apple, from 2016 to 2020, acquired as many as 25 small companies specializing in artificial intelligence, probably with the intent of improving Siri and thinking about other future products. In total, Apple has acquired about 100 companies over the past six years.
At the end of these small acquisitions, Apple always asks for a lot of discretion and warns the staff of the startup not to update the LinkedIn profiles before the actual officialization. In addition, in the event that rumors are spreading about a particular acquisition, Apple asks not to respond to congratulations received from family or friends before the official.
CNBC also claims that Apple is almost never interested in keeping products or services active of acquired companies, which are often forced to completely stop their old business. Precisely for this reason, it seems that the acquired company’s revenues are not really tied to the acquisition decisions by Apple.
L’main focus is the technical staff of the acquired company, rather than the sales or support teams, so much so that in the preliminary agreements it is often specified that a certain number of technical employees must switch to Apple, otherwise the acquisition would not be formalized. On average, the acquisition price is approximately $ 3 million per engineer.
These technical employees would also receive so-called “golden handcuffs,” typically large packages of shares and bonuses that accrue over several years, preventing them from leaving after the completion of an acquisition. The package usually works well, with employees often staying after the first stock assignment.
For what concern acquisition process, the first step always involves a presentation of the target company to Apple’s technical teams. If a team manager wants to bring engineers from that company on board, then they engage the acquisitions team to initiate the transaction.
Rather than bringing banks or other third-party consultants in, Apple’s M&A (mergers and acquisitions) team initiates due diligence and interviews with the team to ensure there are no surprises. After the purchase, a team of Apple specialists integrates the new employees into their new team.