What’s Next After a Serious Competitor is Acquired

Recently I was talking to an entrepreneur that was lamenting how worried they are now that one of their main competitors was acquired. After asking a number of questions and drilling into their situation as best I could, I told him not to worry. Yes, things will change, but no, it won’t be as game-changing as he thinks.

Here are a few things that typically happen after a serious competitor is acquired:

• Tons of PR comes out talking about how this is a major acquisition and the industry is going to change/consolidate/go mainstream
• Quick changes to their branding and website saying they are part of a bigger company (product name changes usually don’t happen right away but the bigger company’s name is usually added to the logo of the acquired company)
• Employees in overlapping positions are let go (back-office jobs like accounting and HR are usually the first to go)
• Paralysis occurs on the engineering and innovation front as a tremendous amount of time is spent integrating things with the mothership and working on a long-term roadmap (this is a key opportunity for the other competitors to keep innovating and get out in front of the newly acquired competitor)
• Prices often rise and more emphasis is put on cross-selling to justify the purchase
• Life continues as normal (the noise will die down and things will continue on just like they always have)

Competition is healthy and when a competitor is acquired things do change, but more often than people realize, a big company acquiring a startup results in a less competitive startup. Less competitive doesn’t mean the acquisition won’t be considered successful, rather priorities will change and the number of directly competitive deals will usually decrease (often a big company takes the startup’s product up market).

What else? What are some other thoughts on what happens next after a competitor is acquired?