Silicon Valley

In Silicon Valley, Mergers Must Meet the Toothbrush Test - NYTimes.com http://dealbook.nytimes.com/2014/08/17/in-silicon-valley-mergers-mu...

MOUNTAIN VIEW, Calif. — When deciding whether Google should spend millions or even billions of dollars in acquiring a new company, its chief executive, Larry Page, asks whether the acquisition passes the toothbrush test: Is it something you will use once or twice a day, and does it make your life better? The esoteric criterion shuns traditional measures of valuing a company like earnings, discounted cash flow or even sales. Instead, Mr. Page is looking for usefulness above profitability, and long-term potential over near-term financial gain. Google’s toothbrush test highlights the increasing autonomy of Silicon Valley’s biggest corporate acquirers — and the marginalized role that investment banks are playing in the latest boom in technology deals. Many of the biggest technology companies are now going it alone when striking large mergers and acquisitions. Companies like Google, Facebook and Cisco Systems are leaning on their internal corporate development teams to identify targets, conduct due diligence and negotiate terms instead of relying on Wall Street bankers. “Larry will look at potential deals at a very early stage,” said Donald Harrison, Google’s vice president of corporate development. “Bankers can be helpful, but they’re not necessarily core to the discussions.” Deals with unadvised buyers are increasing rapidly. The acquiring company did not use an investment bank in 69 percent of American technology acquisitions worth more than $100 million this year, according to Dealogic. That number was 27 percent 10 years ago.

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10-2-2015 17:47

In Silicon Valley, Mergers Must Meet the Toothbrush Test - NYTimes.com http://dealbook.nytimes.com/2014/08/17/in-silicon-valley-mergers-mu...

When Apple bought Beats Electronics for $3 billion this year, it eschewed the help of professional deal advisers. When...