As with most aspects of acquisition methodology legend, the myth of size is, in fact, nowhere near as accurate, and certainly not as useful a benchmark as many would have you believe.  The reason for this is that most of the theories around mergers & acquisitions stem from the analysis of very large, corporate acquisitions, whilst very little time and effort has been spent trying to understand the acquisition dynamics of SME’s. 

Of course, size will always be a relative issue but, in the Software Tech sector, on which Boss Equity focuses, there are far more SME acquisitions - and therefore, opportunities - than large scale acquisitions.  And yet, the bulk of analysis has remained stubbornly focussed on the few, large acquisitions.  Consequently, most of the theories that executives read on the subject of M&A are, at best, skewed and at worst, plainly misleading, useless and, in fact, totally irrelevant to them.

Some common myths that need to be challenged:

1) Large acquisitions prove more profitable for the buyer:

Research has clearly shown the reverse.  Carline et al. (2002).

2) Large companies have the resources to prevent acquisition mistakes:

Research has shown that smaller firms are more likely to pull out of value-destroying mergers, but also that having access to greater resources doesn’t preclude acquisition failure. Moeller et al. (2004)

3) Acquisitions are a more popular growth strategy for large firms than SME’s:

Research has demonstrated that M&A is a very popular and increasingly undertaken, growth strategy for SME’s – much more so than for very large companies. Tjalling C. Koopmans (2009)

If you have a related story to tell, regarding your own experiences of acquiring or selling a business - of any size - in the Software Tech sector, please feel free to join the conversation and share it with us.