Insights into Value Creation and Exit Trends for Technology Companies

This Edition's Topic

5 Quick Tips From M&A Advisors


M&A Advisors are busy!  They are running transactions at a record pace and, as a result, are a wealth of knowledge on what it takes to achieve a successful exit.  I interviewed several of them on the subject and have distilled their wisdom into five impactful tips.         

#1:  Be In Demand

In Demand.png

The number one point shared by all of the advisors was to have a product that has strong demand, in an expanding addressable market, that is not yet saturated with options. 


Although the best exits are for companies that are leaders in their sector, young companies that are new to the market still have a shot for a good valuation. 


In these circumstances they suggest getting solid growth at an accelerated rate over the one to two years running up to the exit.      

#2:  Prove It


Data!  Data!  Data! 


Track all of the data that will enable you to factually prove the value of your solution to the market (and to the potential buyer).  This includes your P&L following standard chart of accounts for the industry, performance KPI’s for your sector, relevant sales metrics, and demand pipeline.  Track the actuals, monitor trends, and be able to show dollar amounts and counts for appropriate metrics.   


They also noted to not lose focus in the runup to your exit and during diligence.  A bad quarter or two can bring a transaction to a screeching halt.

#3:  Build Strategic Relationships


98% of all exits occur through M&A.  Two thirds are strategic acquirers and one third are financial.  The highest results at exit tend to come from strategic acquirers rather than financial so getting in their line of sight will pay off. 


The advisors suggest identifying target partners that may be potential acquirers and building relationships with them.  Another suggestion is to build an internal group that focuses on these relationships, understanding the value that your company brings to them, and tracking financial gains they would achieve by acquiring your company. 

#4:  Get Multiple Offers


This one is quite simple. 


Multiple competing offers tend to drive up the price. To get to this point do items 1 – 3 above. 


In addition, if an unsolicited offer shows up, leverage it to obtain offers from other parties. 

#5:  Prepare


All of the advisors agreed that it is best to prepare for an exit long before it happens.  Some suggest starting this on day 1 while others suggest that this happen before taking on outside investment (as they will want to know their potential ROI). 


They suggest several tactics:  set an exit objective (financial results and timeline), identify exit paths (and potential acquirers if M&A is the path),  develop an understanding of how the buyer will determine their offer price (which varies from VC valuations), prepare the data room, and do a trial valuation / diligence exercise to assess likely sale price in the current market.  

Bonus Tip:  Network with Advisors


This last tip is from me.  The people in this industry are terrific, extremely helpful, and always open to a conversation.  Meet them – particularly the ones that focus on your sector.  They host events, make introductions to professional partners, and are committed to increasing valuations.  I know many of them so drop me a note if I can help with introductions. 


Several M&A Advisors were interviewed for this article.  They are all in the technology sector and manage transaction with enterprise values from $5M to $50M.  Given the sensitivity of this information they asked to have anonymous attribution.  My thanks to all of them for their time and insights for this article.