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Thinking of Selling Your Technology Business? Tech M&A in the Time of COVID-19 (part 2)

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This is the second in a series of four blogs on the impact of COVID-19 on technology M&A written for those considering or in the process of a technology transaction and how to take advantage of the current circumstances.
 

Part 2: Never 'waste' a good technology crisis – it creates new opportunities 

While in some respects M&A process and planning has been affected by COVID-19, new opportunities may also arise as a result of changing dynamics and more available buyers. 

 

Have I missed the mark for f2f meetings?

In "normal" times, a technology M&A process could be as short as 6 or 7 months, or as long as 9 to 12 months.

Across a typical timeline, the preparation phase takes 6 to 8 weeks. Once the company has gone to market, a four-month long market phase ensues, followed by a closing phase which usually lasts around 2 to 3 months. 

In non-public M&A transactions, it is quite normal for companies to have physical management meetings, but these usually occur from around month five of the process.

Looking forward, this means that, were you to start a process today, you would not miss any physical meetings. In retrospect, companies already engaged in a process and closing now can complete the transaction unaffected. 

Technology companies at the greatest risk are those that went to market in late 2019 and are now reaching the point at which it is customary to engage in physical management meetings. 

 

What about going to market now?

While the "management meetings" phase – when the buyer, business unit owner and management get together to talk about integration plans and their vision – will be the most impacted, the going-to-market phase remains more stable.

In going to market now, we have found it surprisingly easy to reach people. There can, of course, be some inward-looking dynamics that take up time and headspace, as technology CEOs deal with pressing internal needs such as cash management or staff changes. 

But, right now, technology companies that are thinking strategically in the long-term and have M&A departments are very readily available because they are not travelling.

As such, the marketing phase during which we as advisors can introduce an opportunity, have people sign an NDA and get an information memorandum is not being impacted.

 

What's the effect on a typical M&A timeline?

The question now is and will be: “with new online methodologies, will we see ‘digital M&A transactions'?”. Will it be possible to complete an M&A process without any physical meetings whatsoever? Perhaps, perhaps not.

Towards the end of the year, some business travel may be permitted again. That's going to coincide with the potential for face-to-face meetings be happening for us in the last quarter for any new projects.

So, we think that the coronavirus and this particular circumstance right now will provide for opportunity to talk to technology buyers right now and actually provide for normal transaction processes towards the end of the year and into 2021.

It could be that that part of the process is extended from two to six months, in which case a process might end up taking 12 to 14 months rather than seven or eight months. This would mean transactions will be more likely to close early next year.  

What, then, would we recommend if you are considering selling your technology company?  We’lll be covering that tomorrow.

 

Continue: part 1 | part 3 | part 4

 

Update on Tech M&A During COVID-19: Webinar series

Join us for a regular update and Q&A webinar.

Hampleton's Miro Parizek, Dr. Jan Eiben and Anton Røthe will deliver an update fresh from the market and answer your questions about selling your business in times of #COVID19.

Next session:
Wednesday, 12 August 
14:00-14:45 BST

Sign up here: Update on Tech M&A During COVID-19 - Hampleton Partners Webinar and Q&A | 12 August.
Download our M&A reports: https://www.hampletonpartners.com/reports/.

 

This article was published by:

Miro-Parizek

Principal Partner

Miro Parizek

Miro Parizek established Hampleton in 2013 with a group of fellow deal makers and technology industry entrepreneurs, uniting hands-on industry expertise and seasoned transaction experience together for the optimal M&A advisory. Miro has been providing M&A advisory services to the technology industry since the pre-dot.com era and has managed scores of transactions supporting privately-held sellers and publicly-traded companies, ranging from 20 to over 2,000 employees.Miro has 30 years of experience in the software and IT industry.


Prior to his M&A career, which began in 1998, Miro founded and ran three software and IT related firms in the ’80s and ’90s, including a leading international software vendor, North American Software. He was a founding member and, for over a decade, treasurer of the German Software Association, which was merged with the country’s multi-media association, creating today’s national association for digital economy (BVDW).

Miro’s experience spans virtually the entire information technology industry. He has managed and closed transactions in sectors as diverse as 3D-imaging, asset management, business intelligence, business performance management, compiler software, CRM, customer services, design collaboration, content and document management, data center automation, e-Learning, enterprise systems management, ERP, GIS sub-systems, human capital management, Internet commerce, IT services, logistics, SaaS, simulation, storage solutions, supply chain management, telecom products, unified messaging, video editing, workforce management and various other verticals. Miro is an avid skier, hiker and enjoys time with his wife and young twins.

Miro has degrees in International Finance from the Wharton School of Business and in Computer Science from the Moore School of Engineering. In addition to his English mother tongue, Miro speaks fluent German after having lived in Germany for over twenty years.