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from the bankers-replaced-by-a-toothbrush dept.
When deciding whether Google should spend millions or even billions of dollars in acquiring a new company, its chief executive, Larry Page, asks whether the acquisition passes the toothbrush test: Is it something you will use once or twice a day, and does it make your life better?
The esoteric criterion shuns traditional measures of valuing a company like earnings, discounted cash flow or even sales. Instead, Mr. Page is looking for usefulness above profitability, and long-term potential over near-term financial gain.
Google’s toothbrush test highlights the increasing autonomy of Silicon Valley’s biggest corporate acquirers — and the marginalized role that investment banks are playing in the latest boom in technology deals.
Many of the biggest technology companies are now going it alone when striking large mergers and acquisitions. Companies like Google, Facebook and Cisco Systems are leaning on their internal corporate development teams to identify targets, conduct due diligence and negotiate terms instead of relying on Wall Street bankers.
(Score: 3, Insightful) by kaszz on Monday August 18 2014, @09:59PM
I think the bigger trend here is that Wall street banksters has shown that they don't bring long term value and thus are ignored in the acquisition decision process.
The test could also be translated into "will this bring profit continuously or just one-off?". Continuous operation is worthwhile to improve and can use previous base to expand. While one-off is just that.