Tech M&A Under the Covid Cloud
As lockdowns and restrictions are being cautiously lifted throughout the world, we take a look at what has happened to tech mergers & acquisitions over this period of enforced lockdown.
Is it “Business as usual” – or are we to believe the ‘doom-mongers’ that we’re all going to Hell in a handcart..?!
Well, as with most situations in life, the truth is somewhere in between the two extremes.
After the March lockdowns, global acquisitions in April slowed down some 26% over April 2019. However, after this initial lull, we at Boss Equity, have witnessed robust activity in tech acquisitions worldwide.
Tech M&A “Winners”
Last year’s winners were AI, healthcare tech, Robotics, FinTech and Cloud computing. And, now the clouds are clearing a little, it seems this year is shaping up with the same focus.
While some organisations scramble to stay ahead of the latest innovations in AI and Robotics, healthcare tech also proliferates, and other companies vie to create the latest apps that take care of our health – with a bias towards prevention and/or early disease detection. (And that’s without mentioning the many organisations involved in tracing & tracking solutions to beat the Covid-19 threat.)
Cloud solutions too, continue to feature heavily, as enterprises seek to meet demand for ever more efficient ways of working from home. And coupled with greater demand for Cloud solutions, comes an increased awareness of the need for Cyber Security solutions.
Thinking of Selling Your Business Now?
For anybody considering selling their business in the current climate, here are the 10 essential things you need to do before proceeding.
- Make Sure Your Company is Strategically Positioned
Before starting any sale process, you need to ensure your company is strategically positioned to best effect – Not only for your target market but ALSO from the M&A perspective of any buyer. Whether or not they're thinking of selling, most companies are NOT optimally positioned to win new business.
Contact me if you need further explanation on this very important point: isabel@bossequity.com - Understand your company’s true worth
So-called experts will tell you that they can value your business via various complex algebraic means and other nonsensical formulae. DO NOT LISTEN TO THEM.In over two decades of helping tech entrepreneurs sell their businesses, we have NEVER used a “multiples of revenue” gauge to decide on the true value in a business. If you go this route, you will certainly leave money on the table. And, when you’ve worked hard, sweated and toiled over building your business, that is something we hate to see. - Find the “Diamonds Under Your Feet”
Experience has taught us that there are hidden ‘diamonds’ in EVERY business. Very often they are hidden in plain sight. Overlooked and/or undervalued. It is these gems you need to bring out into the light, polish off and present to any acquirer. They are your added value or “secret sauce” and will help you achieve a premium sale value at exit. - Look Beyond Your Competitors for a Buyer
When most entrepreneurs start thinking about exiting their business, very often the first thing they do is to look amongst their closest competitors for an acquirer. This is very often the wrong thing to do. Consider: your competitor is in the same line of business as you, so what value will you be adding? The likelihood is they may want to rape your company of its assets, IP etc and little else. To them that is the sum total of perceived value.
Now think of a larger organisation in a complementary sector which wants your technology and/or skills or possibly your geographic reach. This is where you start to add value – It’s also where your business becomes very attractive and can be sold at a premium price. - Verify Stakeholder Alignment
Before any exit can take place, all shareholders must be in alignment with your exit plan. Failure to resolve any issues BEFORE you start the process can result in delays to the sale – or even total failure of the deal. - Substantiate Revenue Predictions
Ensure that you can back up any predictions of future revenue with solid data.
If you have recurring revenue streams, are these documented & scalable? – and do you have contracts in place? - Understand the M&A Process and the Potential Pitfalls
Understand the key steps in the M&A process – And make sure you’re aware of the potential pitfalls. It’s wise to seek a mentor to lead you through the maze unscathed – Just like a parachute jump, there are no second chances. You have to get it right first time. - Create Competitive Tension
Having several acquirers vying to buy your business, creates ‘scarcity value’ and pushes up your sale price. It also identifies those who are serious contenders and weeds out those who are not. - Get Your Timing Right
Timing is critical when selling your business – Don’t ride your business up & over the top of the opportunity for achieving maximum sale value. - Have a “Post Exit Plan”
Have a clear plan for what you’ll do after you’ve sold your business. As an entrepreneur you will get bored very quickly (once you’ve had a rest) and will need a new focus. Many of our past clients have considered retirement but then found themselves setting up a new business or even a charity. Whatever you do, make a plan.
Confidential Pre-Exit Company Health Check
Understanding the strengths and vulnerabilities in your business before beginning any sale process can be reassuring. It gives you the power to make changes if necessary & the confidence to then proceed to your optimal exit.
If you’d like to give your business a pre-exit Health Check click here to get your personalised report straight to your Inbox.
Time investment: 10-15 minutes.
Benefit: Invaluable, personalised insights.
If you'd like to schedule a confidential call with a senior executive click here
