[ By Larry Goldfarb ] Microsoft will invest $300 million in Barnes and Nobles (BN) ostensibly to take control of the production and marketing of the Nook, the electronic reader which competes with  Amazon's Kindle and the Apple iPad.  BN investors responded positively, driving up the stock some 60% by midday. Microsoft will own 17.6% of the Nook operation, which BN will spin off as a separate company.  Microsoft also will gain a stake in BN’s College Bookstore Division.  The deal values the new subsidiary at $1.7 billion. More Than Just a Foothold in Tablet Market. The acquisition effectively provides Microsoft a foothold into the tablet market and puts it in direct competition with the devices produced by Amazon and Apple.  It also allows an outlet for Microsoft’s Windows 8 (mobile) operating system. Most importantly, it foretells the future in what I believe will be an active M & A market for targeted acquisitions for the indefinite future.  Acquisitions are always faster and more efficient that building an operation from scratch.  And in Microsoft’s case, the acquisition will allow it to grow around an area that will make its suite of products and services more valuable. That last comment, pertaining to the positive impact on all other Microsoft lines of business is critical and appears to be a recurrent theme that we've seen recently in the market.  Firms are buying other firms for their expertise, not to reduce competition or create size.  The trend is particularly acute in the financial services industry. Just last week it was reported that Wells Fargo would purchase Merlin Securities, a midized prime broker.  Wells Fargo can take advantage of its low cost of funds and market strength to greatly augment the profitably of this prime broker.  Previously, we've seen targeted acquisitions by Stifel Financial, Raymond James (which bought Morgan Keegan),  as well as by larger firms, like Citi and JPMorgan. Challenge for Compliance and Legal. Our division of the industry, when it comes to acquisitions, strategic or otherwise, is to safeguard the firm’s controls and culture of compliance, while letting the new firm’s employees be successful.  Creating draconian rules immediately will undoubtedly staunch the creativity of these smaller firms and sap morale - if not lead to a revolution or exodus of talented individuals.  Oftentimes, the acquiring firms have been successful by letting the target firm or acquiree run quasi independently - perhaps delaying a full integration until both the firm and its employees understand the culture and rules well enough to embrace them.  The acquired firm still has to comply with certain no-exception policies, but these can be implemented, initially, in a way that does bruise the acquired firm or its personnel. [Reuters, 4/30/12]