From an article published in NYTimes by David Gelles on August 17th, 2014:
“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?”
It is also mentioned that deals with unadvised buyers are increasing rapidly.
Instead of looking at the past of a company to predict its future profitability and turnover, to give a better decision investors are trying to understand what good the company’s products and services will bring to the market.
Another important point is that the profitability of a company is dependent on its management. Even with the same market and products people on two different managements will get two different results.
Be it the shares of a company you want to market or a television, be it your skills when applying for a job or how good a spouse you will be, you have to list the benefits in the future to obtain a positive decision today.
Mr. Gelles continues: “And for the likes of Facebook and Google — shareholder darlings that are flush with cash and run by well-connected entrepreneurs — it is easier than ever to get by without bankers.”
To read the complete article: In Silicon Valley, Mergers Must Meet the Toothbrush Test
The oldie of the week: The Beatles – Ticket To Ride (1965)