Salman Ullah, head of corporate development at Google, explained today at AlwaysOn's Stanford Summit why acquisition negotiations usually fall through with the company.

Aside from a valuation gap that can't be bridged, or a lack of engineering talent, Ullah said Google will always walk if the company being looked at isn't completely honest about the state of their company. For example, Ullah said one company Google was recently talking to didn't disclose the fact that most of their code was written by engineers that were no longer there. Ullah said that if the company doesn't disclose things like that up front and then denies it when questioned by the company, Google will walk no matter how interesting the company is.

His advice to investors and entrepreneurs is to "put their best foot forward" and disclose any possible problems up front. He said that Google might be able to work through them with the company. He said that's because, "You haven't compromised your integrity."

On a two acquisition per month pace, Google sources most of its deals through its operating units. He said YouTube gained attention by Google Video employees while Grand Central was spotted by the Google Talk unit.

The company focuses its M&A activities on three main areas:

Search – Ullah said the company has not done many deals in the search area because they have a large number of search engineers already. "The bar to be acquired is very very high as a search company."
Advertising –Examples include radio advertiser dMarc and RSS advertiser FeedBurner. "All different kinds of advertising is interesting."
Apps – This includes a broad bucket of products, activities and market segments.

What all the segments have in common is that the employees at the companies have strong engineers, tremendous products and great intellectual property.

And Microsoft vet Ullah warned that Google will not acquire traffic for traffic's sake. "It has to be high value traffic. I don’t want to repeat '99 or 2000. We’re very careful on those traffic type deals."

For more on the AlwaysOn conference, see:
Tech Confidential blog
Chris Gulker

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