Today’s Wall St. Journal article “With Fistfuls of Cash, Firms on Hunt” suggests that companies are ready to stop hoarding cash and start shopping. The question is how can you find possible acquisition targets? If your company is big enough, the target might be a rival or competitor. But, what if you seek to acquire an organization with just the right technology to enhance a product offering or fill a niche. How do you find the target?
To find just the right acquisition to boost technological skills in an area, PI suggests a process we call “Active Screening.” In this case, we search patents broadly and organize the patents into market and technology categories and segments. By using patents to find targets, we get a very large target list. Then, using a simple model, it is possible to measure the technological fit between the target organization and the acquiring company. The better the fit, the better the target, a good first step.
Patent Insights has been talking about this idea for some time. In one example, we back tested the “goodness of fit” of SIRNA to Merck, a spectacular acquisition in the pharmaceutical (RNA interference) sector in 2006. We back tested the acquisition using our active screening process. in 2008. Our white paper outlines the process the approach for this example.
Obviously, active screening is just a first step. You still need to evaluate financials, management fit, competition and a host of other critical issues, but active screening can broaden your list of targets.