If you are a founder of a software or tech-related business, selling it (M&A) is one of the options to be rewarded for your hard work.
There are several options available, depending on your goals, the size of your business, and the industry landscape. Here are some common options to sell your technology business:
Strategic Acquisition: Sell your business to a larger company operating in the same or a complementary industry.
Financial Acquisition: Sell your business to a financial buyer, such as a private equity firm, venture capital firm, or family office.
Management Buyout (MBO): In an MBO, the existing management team or employees of your business acquire the company
Mergers: You can merge your technology business with another company in a similar or complementary industry,
Asset Sale: Instead of selling the entire business, you can choose to sell specific assets, such as intellectual property, customer lists, or equipment.
The industry and business model of companies plays a role in M&A options
Software as a service (SaaS)
Ecommerce & direct-to-consumer (DTC) companies
Pure tech businesses like AI, VR or hardware
Pre / early-launch products, websites, apps.
Another variable in acquisitions and sales involves the amount of funding (or debt) a company has as these typically come with limitations on company founders in making key decisions such as M&A by themselves.
Companies with non or small amounts of funding have a lot more freedom in M&A deals and involve the following activities as part of the process:
Work your own network. Put a sales deck together and get the word out.
Another option is to list your company with a business sales website, the ones specializing in tech businesses. These sites will help hone your pitch and presentation and even assign an agent to work with you and help thru the sales process. They make money by taking a commission from the sale price.
Some of the listing companies for tech business are:
The large majority of buyers are financial buyers looking at an acquisition as a customer acquisition tool and justify it by saving on CAC (customer acquisition costs) of new customers. The assumption is the acquired company’s customers will be open to the new company’s way of doing business, product development and this is not always the case. The revenues from the acquired company also go on the acquirer’s balance sheets as growth which is the other main reason for the acquisition.
Considering that two-thirds or more of acquisitions fail to meet the initial expectations either the assumptions are off, most acquiring companies are not good at executing the integration or both. This does not mean we should not acquire other companies, but it does point to the fact that companies need to get better at initial projections and at integration of the acquired company or product into their own system.
Strategic M&A is more complex than financial types in that there are fewer resources to help market the deal and the number of candidates for purchasing your company are more limited.
The strategic acquisition space is where we feel there is potential for innovation in creating more options for listing and buying strategic products or companies. If your company has valuable technology and assets but pre-revenue or before scale it falls into the strategic category.
A key question when looking at a strategic acquisition is how to value these products. Some options are:
cost to build: how much will it cost you to build a similar product.
opportunity cost: what other opportunities will you miss out if you make this deal.
competitive access: are you preventing a competitor from access to assets or technology.
time to market: how fast do you want to start tapping into the new customer and revenue base.
As it’s clear conducting M&A for technology companies can be complex and having correct and current information is required. Some of the good resources to learn more about how M&A works for startups are:
Built To Sell
At Infiniventures we are also building a different solution focused on STRATEGIC M&A with a new product marketplace.
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