As the market for public offerings has all but dried up – with only one venture-backed technology IPO through the first eight months of this year – and as large public companies have built massive cash reserves, acquisitions have become the primary exit driver for entrepreneurs and their venture backers.

And while that gives corporate buyers certain leverage in pursuing startup purchases, those buyers also face significant risks. The pitfalls begin to appear during deal execution and continue through integration. Some deals even come to haunt the buyer years later, particularly when the seller had valuable but legally problematic intellectual property. And buying companies poses cultural and ethical challenges, as well as financial ones.

But smart buyers know their way around all of those risks, and a group of those gathered at the 2016 DLA Piper Global Technology Summit. On a panel entitled "M&A Exits – The Buyers Speak" and moderated by Curtis Mo, a partner in DLA Piper's Silicon Valley office, a diverse group of corporate-development leaders shared their thoughts on the best, and worst, ways to get deals done in today's tech environment.

 What follows are highlights from their conversation. The panelists were:

How are you sourcing deals?

Sobota: I work closely with our product areas, understanding what their priorities are, what they want to build and how M&A can help them. Another great source is our senior leadership; Larry [Page], Sergei [Brin] and Sundar [Pichai] have ideas about where they want to take the company that may even be in areas where Google isn't focused today. We also get dozens of emails every day from bankers and accountants; we follow up on all of those.

What structures do you prefer?

Nelles: Probably 40 percent of our deals are asset deals, carve-out type structures. They are largely cash because we have a lot available, but we've done all sorts of crazy structures to facilitate transactions. We try to conform the structure of the deal to whatever the dynamics are and the constraints we find.

Do you use earn-outs?

Sobota: We've found that earn-outs largely don't work because our typical m.o. is to mix the new employees in with the Google employees. So it's hard to separate the success of the company we acquired from the success Google contributed. It's also hard to predict what the goals should be years in advance.

Nelles: We absolutely hate earn-outs. I feel like it sets up a fight down the road, especially because we're often buying a piece of technology that goes into a chip and it's really hard to decide what portion of the revenue is attributable to their piece when you mix technologies like that.

Hoe: I agree that it doesn't work for every deal, but sometimes when entering new markets, earn-outs can align the parties very closely on the incentives. The ultimate judge of whether a deal is working is adoption and revenue. And it helps in shifting the risk, and the rewards. So I view it as an option, and our stance on these types of questions is that strategy and business objectives come first, then structure.

How do you approach integrating talent?

Hoe: People are the first thing we look at when we consider a transaction. You can have a plan and a vision, but someone has to execute. So we start by identifying the key people to execute the plan, and once we have that picture, we have a very skilled HR team who looks carefully at their retention value. Sometimes we add in additional deal value to get that retention. We also have something we call a founders' forum for all the CEOs of our acquired companies. It gives them a place to support each other, and to work together to influence the bigger picture at Cisco. 

Nelles: For smaller companies, we've found a lot of success in meeting with all of the employees of the target company. When we go out and talk to them and see what makes them tick, we often find out it's different than what senior management has been saying.

Sobota: It's hard for someone who's a CEO to come into a bigger organization and your people are scattered all over and you're no longer in charge. So we recently hired someone whose full-time job is to be a white-glove service provider to newly acquired CEOs and senior management. It's their job to help them through that transition.

What do you look for in due diligence?

Nelles: The number-one area we focus on is contract diligence, on what type of IP provisions they've signed. In large deals or even small deals there can be potential liabilities that could be crushing to Qualcomm. One of the biggest things we're seeing is that companies signed up a marquee customer and were so excited, but those customers put things in the contracts like upstream license affiliates that could eviscerate the value of our patent portfolio. Those are non-starters for us.

Sobota: The biggest thing that can make a deal go sideways for us is a big surprise, something that borders on unethical and comes after we've got a letter of agreement. I don't expect you to air all of your dirty laundry on day one, but you're better off telling us about it, putting your own story on it. Having us find out about something through diligence makes us question your integrity.