Many are convinced that the buyer with the most money always wins the deal. Although many acquisitions by financial acquirers and strategic buyers are driven by the desire to grow revenue and the company’s bottom line, it is possible to win an acquisition without offering the most amount of money.

A successful acquisition is about finding the right equation for the seller, which includes, of course, financial compensation, as well as many other non-financial aspects including prestige, value, excitement, or strategic fit.

It can be difficult to visualize this concept, so let’s take a look at a recent example from the news. Amazon announced it would acquire Souq.com a Dubai-based internet retailer. While terms of the deal were not disclosed, Amazon reportedly paid between $650-750 million, beating out a competing offer for $800 million from Emaar Mall. So why would Souq sell to Amazon for a lower price?

From Amazon’s perspective, this deal makes a lot of sense because it will allow Amazon to enter into the Middle East while circumventing regulatory hurdles, the headache of building new infrastructure, and the cost of raising brand awareness. Souq.com is already a very popular in the Middle East where e-commerce is expanding among a growing young, tech-savvy population. Kuwait, Saudi Arabia and the UAE are the top markets for mobile penetration. In addition, Middle Easterners are willing to pay a 50-100% premium for Western products and brands from the US. The Souq acquisition will help with top-line and bottom-line growth.

So what’s in in for Souq? Why agree to a deal for less money?  The answer is Amazon’s experience and reputation. As one of the top global companies, Amazon has a large network, resources, and deep experience with e-commerce. Souq can leverage Amazon’s experience to continue growing.

It is also exciting to be acquired by a well-recognized brand and be a part of Amazon’s team. While we can’t know what the founder of Souq, Ronaldo Mouchawar, was thinking, we can safely assume emotion had some factor in the decision-making. Don’t completely forget about the human factor and emotions when it comes to M&A, especially when dealing with owners and privately-held businesses. In fact, understanding the owners motivations – excitement, family-members in the business, community pride, desire to leave a lasting legacy, risk aversion, or financial – is key to developing the right equation to persuade him or her to sell.

Photo Credit: Mike Mozart via Flickr cc

The biggest tech M&A disasters were the Time Warner-AOL $350 billion merger and Google’s $12.3 billion acquisition of Motorola Mobility.  In my observations, the greatest hurdle facing tech mergers is integration. Even where the strategy of the acquisition is solid, if the integration of the two workforces and assets is not executed properly, it will fail.  Even CEO Marissa Mayer, who has made more than 30 acquisitions since joining Yahoo in 2012, may be struggling with integration. Just last week she fired Henrique De Castro, her COO and the person typically responsible for integration.

Lessons Learned From Integration Struggles

Warning signs of the Time-Warner AOL disaster began with the press release they put out after consummating the deal. It contained lots of flowery language, but left everyone scratching their heads as to why the two companies were merging. There was also a culture clash. Executives struggled with integrating an up-and-coming young tech company with an established media mogul. Eventually, in 2009, Time Warner had to dispose of AOL.

Google’s purchase of Motorola Mobility in 2011 also failed to meet expectations and Google announced on January 29, 2014 it would sell the acquisition to China’s Lenovo. This loss-making division was supposed to usher in an era of new devices built entirely by Google. Unfortunately, Moto X, Motorola’s smartphone, performed poorly in comparison to comparable devices. Google’s failure with Motorola was partly due to issues with integrating Motorola with Google’s existing hardware division and with the company as a whole.  Perhaps Lenovo will have more success.

Amazon M&A Proves Bigger Is Not Always Better

The moral we can draw from this is that bigger is not always better. Although big acquisitions are the most visible due to widespread media coverage, they often fail to be truly successful.

Amazon provides an instructive example. Between 1998 and 2001, Amazon approached acquisition the wrong way, buying or investing in 29 companies across various industries from toys to car dealerships to financial services. Most of these acquisitions failed and Amazon’s stock plummeted from its peak at $106.69 on December 10, 1999 to a low of $5.97 in on September 28, 2001.

However, since 2004, Amazon has refocused on making smaller, strategic acquisitions. This is what I call “taking frequent small bites of the apple.”

Its most recent acquisition of social media site Goodreads, valued at $150 – $200 million, was tiny compared to Time Warner-AOL or even Google-Motorola. However, with Goodreads Amazon can build on its personalized recommendations and gain access to book fans. Amazon acquired TouchCo in 2010 for touch screen technology now used in Kindle Fires.  Building on this capability, Amazon acquired Liquavista, a mobile display technology company, in 2013. Amazon’s stock price is now $403.01 (as of January 30, 2014).

Small, strategic acquisitions allow companies to “digest” and integrate the entity. In all acquisitions, the devil is in the details. Although your strategy may be solid, if you don’t make sure all the pieces fit together, your acquisition is bound to fail. At the end of the day, companies, even tech companies, are made up of people. It is the people, more than the systems or technologies,that present the biggest challenges of integration. To overcome these, you need a strong leader with the wisdom and experience to combine different cultures while overseeing the operations of a newly merged company.