Structuring M&A as an alternative to R&D

This topic contains 2 replies, has 3 voices, and was last updated by  Thant Coleman 1 year, 10 months ago.

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    Considering the costs of research and development, both in human resources and equipment, would it be more cost effective to develop the R&D infrastructure or to acquire startups with innovative ideas and teams with the expertise to bring those ideas to market.

    Think of the case of a large brewer who can spend their R&D budget creating and testing new products in-house or acquiring a small craft brewer who can not only provide new products but will also show how their products have done in the local market. Acquiring the craft brewer would provide the desired R&D, “market research” (sales numbers), profits from those sales would offset the R&D costs, and the acquisition would also give the acquirer an extra bit of marketshare. All benefits that a traditional R&D department wouldn’t be able to provide.


    Ingrid Holbik

    I believe there is risk in M&A and R&D; albeit different risks. Think of it as buying the product (M&A) versus creating the process (R&D). That said, I do believe that M&A does provide the fastest path to growth and that the culture risk is less than that the risk associated with building up an R&D department.


    Thant Coleman

    It seems that your question may be posed with an Acquirer and Target in mind. There would be no boilerplate answer your question as each and every scenario relative to acquiring a target for R&D would be different. I would offer that a company could define their policy for determining the build or buy decision (build infrastructure or buy) and apply that methodology to each scenario. I’m sure there would be instances where the Acquirer has capable resources and equipment to get the job done and in another instance they may not. Having the business strategy for R&D along with criteria for determining the build/buy decision would then be much easier.

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