As a tech entrepreneur, you often hear buzz about other companies utilizing an M&A strategy to grow and scale. For example, Vancouver-based PDFTron recently acquired ActivePDF; Calgary-based Absorb Software acquired Koantic. You can’t help but be intrigued. One day the same opportunity might come up for you. How to ensure that you are prepared as either a buyer or seller?
For now, between adapting to the post-COVID reality and staying on top of your regular responsibilities, you’re probably too busy to think about it. Don’t be. Filing the M&A idea forward is understandable—but not strategic, advises Lyndsay Kerwin, Vice President at the growth equity firm Silversmith Capital Partners, and a panelist at the November 24-25, 2020 virtual Western TechExit.io Conference. “March and April were uncertain, but we have seen deal volumes pick up in the past few months. We are seeing some businesses who have not previously considered bringing on a capital partner now take time to evaluate their options, whether it be a partial liquidity event or a full sale. Silversmith just raised our third fund of $880 million, and is actively looking for new companies to partner with. Given the amount of capital available in the market today, there continue to be many options for founders in the near term.”
Citing ActivePDF and Koantic, Kerwin asserts, “We think these ‘better together’ strategies make sense in any market environment, and particularly now as scaled companies are even better equipped to compete and solidify positions in competitive markets.”
If you’re an entrepreneur, be ready for opportunities, urges David Tyldesley, Vice President & Co-Founder of TechExit.io. “Tech moves fast, the industry moves fast. When that knock on the door comes, will you be ready to respond or at least have a strategy in place?”
With a hard focus on mergers and acquisition strategies for technology companies, TechExit.io aims to get you M&A-ready from day one. Proper preparation can take from two to five years but is well worth it, Tyldesley says. “If unprepared, you might go into negotiations thinking the most important thing is money. That could expose other issues, for example, what happens to staff, and whether you are structured properly for tax. There may be vulnerabilities around intellectual properties, contracts or shareholder agreements not properly organized. The danger of being unprepared is that a lot of money will be left on the table and even worse, a deal won’t close.”
At TechExit.io, you’ll learn what you need to know, and what to avoid, from sellers’ and buyers’ perspectives. As well, promises Tyldesley, speakers like Kerwin—including Aly Gillani, Managing Director, RBC Capital Markets; Atulan Navaratnam, Vice President, OpenText; Constantine Hatzipanayis, Partner, BDC Capital; and Sureel Sheth, Principal, JMI Equity—will take you right into acquirers’ minds.
Lyndsay Kerwin - Vice President - Silversmith Capital Partners
At Silversmith, Kerwin focuses on investments in SaaS and Information services, including software and tech-enabled services companies. “We look for founding teams that have bootstrapped or built their businesses with very little outside capital before our investment.
Also, growth, velocity, sales efficiency—and, pivotally, how often customers come back to buy again.”
Kerwin advises that keeping track of data is key. “We usually ask for a basic historical income statement, at least one to two years of forecast, and whatever other operating metrics the management team uses to track the business. When an M&A process stumbles, it’s usually because of surprises. Something wasn’t disclosed up front, like a big customer that was lost, someone important in the company leaving, or a lawsuit on the company. Everything should be discussed early on. We don’t expect perfection. It is trust and openness we’re looking for.”
Kerwin describes a collage hanging in the Silversmith office: The time is always now. “An exit can mean a partial sale or it can mean a full sale. There are always options for entrepreneurism,” she stresses.
“Yes, we are dealing with a new world and paradigm. If you had told me this time last year that my team would be discussing new opportunities from desks in our respective apartments and homes, I would not have believed you. But we are looking to partner and support entrepreneurs and build relationships early. And I’m available to entrepreneurs 24/7 if they want to talk.”
The tech industry is dynamic, with M&As back big-time and ever-developing. No matter what your stage in business, there’s no waiting period. Get ready—because the same steps used to become M&A-ready are the same steps you take to run a tight, profitable and successful tech company.
To find out more about the November 24-25 TechExit.io conference and to register, visit https://techexit.io/now-west/
