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M&A In The Age of Covid-19: FAQs (Part 5)


Is it possible to sell a company that hasn’t yet generated any revenues?

It’s not unheard of for buyers to look for “pure tech targets” or engage in “acqui-hires”, where they may disregard revenues and focus exclusively on product specifications.

Overall, however, entrepreneurs or seed investors are better off perfecting their tech product by funnelling extra funds into the project and building out their customer base. Prospective buyers will rarely bank on the potential popularity of a product without having seen the customer base for it.


It looks like tech M&A staged a remarkable recovery in the second half of 2020. Do you think this will continue and if so, why?

Clearly, COVID-19 has had a massive effect on economies worldwide. But very quickly during Q2 2020, both strategic and financial investors were able to discern which industries were impacted negatively or positively by the pandemic.

Retail and travel were hit very hard, killing deal activity involving companies that serve those verticals.

Meanwhile, e-commerce and the health vertical boomed, driving M&A amongst vendors enabling digital commerce and automation of the health sector.

We anticipate Tech M&A to remain robust in both volume and value this year as technology vendors continue making strategic acquisitions, and both traditional industry players and financial who have quickly and aggressively re-entered the technology market have added more technology to their portfolios.

From a Hampleton point of view, we’ve started 2021 with a flurry of activity and a strong portfolio of mandates in sectors including AR/VR, electric vehicles, IoT, digital marketing, e-commerce, payments and digital banking and transformation.


The NASDAQ bounced back to its pre-COVID peak in just over 3 months and has continued to climb ever since, injecting confidence into the market. How does this compare to the 2008/2009 financial crash and does this tell us anything?

It’s an interesting comparison: the NASDAQ took over 22 months to recover its value back then. We think this is indicative of confidence based on the reality that, in the intervening period, the tech sector has become intrinsic to all aspects of global economy activity and that will be fundamental to creating a future global economy that is resilient in the face of COVID-19 and future pandemics.

We’re already seeing this in the massive acceleration in digitisation and disruption across all areas of the economy – activity that would have taken years to accomplish previously being compressed into months - years of and, as economies start to recover, those sectors such as travel and retail that have been hit hardest will re-emerge with much higher degrees of digitisation.

For instance, D2C will continue to be a dominant business model in retail digital commerce over the next two to three years. D2C is the key for companies looking to quickly create an e-shop and update their e-commerce software to keep up with the market. Ultimately, this wave will also create demand in areas from end-consumer management to selling, customer engagement, after-sales service, logistics and fulfilment

But other forces will come into play. We’re likely to see more interest in sustainable commerce – both in terms of product and process sustainability. The new generation of digitally native online shoppers is ecologically conscious and favours the circular economy.

Moreover, as e-commerce grows, so will parallel technologies which form an integral part of the broader e-commerce ecosystem. Digital commerce companies focused on logistics, last-mile fulfilment and returns will be receiving more attention in the next months and years.


IT & Business Services are at the centre, enabling much of the economic change and movements to the cloud. Isn’t it counter-intuitive that valuations are falling, as per your latest M&A report?

The reality is those summary figures belie a more complex situation.

2020 was volatile, of course, with transaction activity rebounding strongly after a brief hiatus in Q2 and then ultimately reaching the highest half-year volume in the sector since 2018.

Interestingly, median IT & Business Services EBITDA multiples dipped below the historic mean levels, while revenue multiples maintained a higher-than-mean level. However, the range of disclosed valuation metrics is huge, from as low as 1.1x and as high as 30.8x on EBITDA.

Announced revenue multiples were even greater in variance, as low as 0.1x and as high as 10.9x – for revenue multiples.

The large range of valuation metrics is due to a variety of factors including growth rates, profitability, geography, domain expertise and service offerings – the `quality` of the acquisition being pursued.

For instance, while companies with payment processing services garnered healthy valuations in the 15x EBITDA range, a 42-year-old $47 billion distribution company was purchased for 0.15x revenues.

But, again, we believe 2021 is going to be an active year for M&A in IT Services, as PE investors continue to consolidate certain markets and larger established vendors acquire specialised skills not developed organically in-house.


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