Foreign acquisitions : the end of the Norwegian IT industry?

Abstract

When Norwegian IT companies are sold out of the country it often results in a debate regarding the effects it might have on the industry. There are both skeptics and those that endorse these acquisitions, but to our knowledge no research has been conducted regarding the effect it has on the acquired companies. This led us to the following research question: What strategic and structural changes take place within Norwegian IT companies after they have been acquired by foreign investors? An analysis of the market has been conducted which resulted in the creation of an overview of all acquisitions made in the Norwegian IT industry from 2003 to 2013. A quantitative and qualitative analysis of these acquisitions was conducted. Performance data was analyzed and compared to a control group, in order to uncover differences. This thesis also present results from multiple interviews with management in acquired companies, representatives from trade organizations, and other relevant actors. The study showed that companies that were acquired often became a part of the overall strategy of the acquiring company, and lost control of some parts of the value chain. At the same time acquired companies were able to specialize in their core competencies such as R&D and software development. Access to capital was found to be a problem for companies in the IT industry. Competence within sales was also found to be a challenge for companies with international ambitions. Low cost of highly educated employees, long-term relationships between companies and their employees, as well as strong ties to other industries was found to be strong attributes of the Norwegian IT industry. Few cultural differences between the acquiring and acquired company made the integration process in many cases fairly seamless compared to other industries. We are nowhere near the end of the Norwegian IT industry, and foreign acquisitions seem to be a necessary part for the future of the industry. With some minor, but important tax changes, the industry will be well positioned with a strong entrepreneurial culture that supports new and innovative IT companies.