We can think of seven business combinations in the quantum industry that have occurred over the past several years. These include:
- Keysight / Signadyne (2016)
- Rigetti / QxBranch (2019)
- Keysight / Labber Quantum (2020)
- Keysight / Quantum Benchmark (2021)
- Honeywell Quantum Systems / Cambridge Quantum (2021)
- Rohde & Schwarz / Zurich Instruments (2021)
- Pasqal / Qu&Co (2022)
The benefits of such combinations can include better financial stability, economies of scale, business development and customer acquisition increase, development of new product lines, increased market share, ability to better integrate hardware and software technologies for improved performance, and ability to co-design next generation hardware and software products to achieve improved performance for specific markets.
But there are potential downsides too. There could be a culture clash if the two companies’ cultures are much different. Companies may find good employees leaving if they are not satisfied with the merger. A merger may cause additional distractions that may impair a company’s ability to execute on its existing business. And companies that have developed partnership with organizations that compete with the other side may not be able to keep those partnerships intact.
There have been hundreds, if not thousands, of mergers and acquisitions that have been executed over the past seventy years in the classical computer business. And all of the pros and cons stated above have played a factor in whether the transaction turned out to be a success or a failure. However, there is one factor that has historically been important in the classical industry that we don’t believe will be significant right now in the quantum industry. That factor is the motivation to merge in order to achieving cost reductions and higher efficiencies. Quite often we will see acquisitions occurring and then after the transaction has been finalized the new organizations will start to eliminate redundant organizations, close divisions, implement product end-of-life, and lay off employees. At this point, we don’t see that as a big factor in quantum because the industry is still so new.
Our belief is that the pace is starting to pick up and we will be seeing many more of these combinations over the next few years. Mergers and acquisitions are all very common as industries start to mature, and the quantum industry will be no different. The combinations are often quite risky. Although there have been some spectacular acquisitions (e.g. Google/YouTube) in the past, there have also been many large failures (e.g. HP/Autonomy) too. Although we can’t predict which deals will happen or which ones will be successful or not, we are sure that many deals will happen and the whole structure of the industry will be much different ten years from now than it is today.
January 11, 2022