Given today’s very active technology merger and acquisition market, which continues to look strong in 2015, it makes sense to proactively prepare to achieve the most value from your exit.
Too often, technology companies seeking a profitable exit make the flawed assumption that the due diligence and valuation process is driven solely by the buyer. This assumption can lead to fatal positioning and diligence mistakes, which undermine value, slow the evaluation process, or ultimately kill the deal. The truth is, as a selling team you have an enormous opportunity to shorten due diligence timelines and proactively repair those areas acquirers look to press their advantage, thus maximizing the value that the buyer assigns to your company.
Perhaps you’ve heard the saying that technology companies are generally bought, not sold. That’s true. The largest, most active buyers—companies like IBM, Google, Oracle, and Microsoft—are continually seeking out and evaluating emerging technology companies to expand their portfolios.
This has two important implications for the selling company:
First, you never know when a potential buyer will “knock on your door,” so your senior team should be prepared for a rapid, comprehensive due diligence process now.
Second, you need to understand the core aspects of the technology buyer’s key valuation criteria and then scrutinize your company from the buyer’s perspective, or from “outside in.”
Remember, during the due diligence process, time is not your friend; the longer the diligence process stretches out the higher the probability that concerns will arise, and purchase price adjustments will occur. Careful examination of your company from an external perspective and addressing potential buyers’ concerns in advance will not only increase the likelihood of receiving the price that was agreed to in the term sheet, but will also make the deal move faster and improve the chance of a successful outcome.