The Urge to Merge? Look Before You Leap

There were two notable mergers in the world of small tech companies, and they serve as good examples for the kinds of deals people will be looking for these days. 

Silicon Alley Insider’s Dan Frommer reported that New York City-based Aviary, which makes Web-based creative software, bought Digimix, a small company that makes Web-based audio editing software.

The play: Digimix's audio editor technology can make Aviary a true Web-based creative suite. If it succeeds at doing that, it'll be more valuable to a bigger potential buyer such as Adobe or Google.

The other deal pairs Stockholm-based Stardoll, a fashion and dress-up site for young girls (with 27 million members), with San Francisco-based Piczo, a teen portal with music, contests, and photos.

So, you combine Stardoll's audience and with Pizco’s product and there’s a company that becomes a nicely targeted advertising property with some degree of scale.

While the money isn’t huge, both operate on the same theory: the new whole is more valuable than the sum of the old parts.

The other point to pay attention to is that the deals merged similar but not identical companies. With different products and skill sets, there’s less likely to be a culture war inside the new companies—not an insignificant consideration going forward.

Turf wars inside companies distract management, and more importantly, the troops from doing the work that’s actually going to set them apart in the market. Avoid them, and it’s not only cultural, but a competitive advantage.

And they have some time to get their joined companies on the same page. Google, for one, has said it's waiting to buy companies until prices come down.