Why do big companies buy smaller ones? What is their strategy? What makes a good acquisition target?
Depends on what you're looking for
Cash flows - I want to hold this business forever because it generates good profit every year and I'm just going to live off the cash flows
Organic growth + resale - I want to grow this business so it becomes more attractive to other buyers and I want to sell it in 3-5 years.
Execute on a strategy like a roll-up - I want to buy a lot of related businesses and then consolidate them under one umbrella, which will reduce costs and improve efficiency
Buy their customers/market share as an expansion strategy - I want to be the dominant player in the space because the cost of competing is too high
Acquire their talent - They have a great management team that I want to bring in-house (big companies like Google and Facebook do this)