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How big acquisitions represent buying into disruption

Mon 25 Jul 2016
FYI, this story is more than a year old

Article by David Yockelson, Gartner research VP.

In the past week, there were two acquisitions announced that would seem to be entirely unrelated. These are the Softbank acquisition of ARM Holdings for $32B (that’s roughly 23.8X revenues) and the Uniliver acquisition of Dollar Shave Club for a “mere” $1B (which, given its $152M in sales last year according to Bloomberg, means a roughly 6.5X multiple of revenues).

Indeed, given ARM’s focus as a chip designer and Dollar Shave Club’s (DSC) male grooming focus, there’s nothing to indicate that these M&A events would have anything to do with one another.

However, both demonstrate prospective acquirers buying into disruption. Now, one could argue with the timing of these buys as well as their multiples (i.e., are the buyers arriving late to their respective sellers’ markets? Are they paying too much to get in?), but one can’t argue with the disruptions that both ARM and DSC have caused to date.

ARM designs dominate the mobile world (which has been a particular interest of Softbank), and ARM has its designs (pun intended) on Internet of Things (IoT) futures as do most other semiconductor designers and manufacturers.

DSC shaved (sorry, can’t help myself) points out of Gillette’s market share for men’s shaving and grooming products, and while Gillette has responded with a shave club of its own (and DSC spawned similar competitors), DSC represents an ongoing threat, particularly if it could expand further outside North America.

Indeed, this blog spoke of DSC’s disruptive potential here a few months ago (I picked the wrong buyer but the right motive).

Softbank sees a future in mobility and IoT; Unilever sees a winning business model and a chance to help it grow and potentially eat into a competitor’s business further.

Both wish to capitalise on the disruptions that their planned acquisitions have caused, and both seek to continue those and pursue further disruptive business models and ventures.

Article by David Yockelson, Gartner research VP.

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