Four M&A tips for a successful tech business exit strategy
A successful M&A project requires a robust business exit strategy. What are some key tips to ensure a deal goes to plan?
To find out how to successfully navigate the M&A process, corporate finance advisers Moore Kingston Smith and UKTN brought together four business leaders with experience buying or selling a tech company.
Four key business exit strategy tips from the panel
1. Don’t get emotional
The due diligence analysis stage can be an intense process – particularly for leaders who also founded the company.
For some, it might be the first time the inner workings and financials of the company are being scrutinised.
Nick Thompson, partner at Moore Kingston Smith, says that there are “always due diligence problems – don’t get offended by them”.
Here, it’s important to stay objective and let the due diligence team do their job.
Thompson, who has advised on many M&A deals in the IT managed services sector, adds that getting frustrated could backfire as it could indicate to the due diligence team that there are deeper issues to find.
“So actually, be amicable with them and helpful is only going to help yourself.”
He adds: “Don’t get emotional, it’s a long, long journey.”
2. Get to know your buyers early
A critical part of M&A is finding the right buyer or seller. To avoid wasting time pursuing a deal that ultimately isn’t the right fit, it’s important to get to know the buyer as well as possible early on.
“Establish who your buyers are and get to know them early before you start the process,” says Mark Simons, managing director of Prime Networks, a managed services firm that has made five bolt-on acquisitions in recent years.
In addition to getting to know the buyer, Simons recommends getting to know your own business better.
“If you are considering exit, it is a good idea to do vendor due diligence on yourself prior to going into that process, because it’s far easier to iron out whatever issues that come up,” Simons explains.
Using advisors can help with this process.
“We’re acutely aware that we don’t know what we don’t know,” says Simons. “So an advisor is very, very important.”
3. Have a plan B
During an M&A, not everything will go to plan. On the extreme end, this can mean a deal collapsing.
Dominic Ward, CEO of data centre company Verne, has directly experienced this when a buyer pulled out at the eleventh hour.
“It happens a lot,” he says. “More often that people ever want to let on, because people never hear about those deals that fall over, nobody ever talks about those.”
He recommends having a backup plan as part of a business exit strategy and staying on good terms with other potential partners.
“Never burn a bridge, keep them all warm, you never know when you’re going to need them,” says Ward, who oversaw the sale of Verne to private investment house Ardian for a total of $575m.
He adds: “So, have a plan B, be prepared for the worst – because it does actually happen.”
4. Keep momentum post-deal
Once an M&A is over the line, it can be easy to fall into the trap of thinking that the hard bit is over.
The reality, however, is that it’s the beginning of a long integration process. This includes everything from people to IT to culture.
“I think lots of companies can get carried away, says Ruth Collett, CMO at The Adaptavist Group, a family of digital transformation companies. “They do the M&A, the deal is done, and the energy is lost, the balloon is a little bit deflated.”
In addition to the integration, it’s key to keep sight of the reasons behind the deal in the first place as part of your business exit strategy.
“I think that’s really important, to keep pushing for that vision that you had at the beginning,” says Collett, who has been involved with six acquisitions since joining The Adaptavist Group.
She adds: “Keep the momentum going after the deal has closed.”
Find out more about how to realise the value of the technology business.
In partnership with UKTN.