ARYZE visited the beautiful Crowne Plaza Copenhagen Towers to attend a Tech M&A Conference hosted by Corum Group. The speaker, Mattias Borg, talked disruptive tech trends, M&A concerns and how to achieve optimal outcomes when selling. After the conference, ARYZE talked with Borg to get behind the numbers into his personal experience and advice.
Mattias Borg is an expert on all things M&A. He has been on two sides of the M&A process: his own company, James Concepts AB, was acquired by Sodexo in 2008, and now he is the Vice President at Corum Mergers and Acquisitions. Corum focuses on negotiating the acquisition of tech companies by global buyers. Borg travels around the world presenting his knowledge on how to successfully sell to those global acquirers. ARYZE was invited to attend one of those presentations, which covered the top ten disruptive tech trends, the biggest deal killers, what an optimal selling outcome looks like and how to attain one. After the conference, Borg answered some of our questions about M&A.
According to Borg, the top ten types of technology companies in 2020 are:
- AI Enablement
- Actionable Analytics
- Payment Stream Control
- IoT Software
- Hybrid Cloud
- Focused IT Services
- Healthtech Continuum
- Regtech systems
- Smart Logistics
- Blue Collar Software
The innovative and disruptive nature of these trends means that M&A of tech companies remains strong. Additionally, there is a lot of cash flowing from both financial and strategic buyers, and there are many companies just beginning to acquire. Says Borg:
“In 25% of cases our client has never even heard about the buyer, and in the rest of cases, they know the buyer but have no relationship to them.”
One reason companies may not know of their potential acquirer is because they may operate internationally. Borg argues that expanding the search scope internationally for potential buyers is central to obtaining an optimal outcome:
“With tech, the market is global, so to get the highest price and the fair market value for the company, you need a global process…even for European companies, you want to bring American buyers to the table, because the fact is, they pay more. CEOs have a fiduciary responsibility to their shareholders to find the best deal when selling.”
Some of the top deal killers are misalignment between employees, management and shareholders; contacting interested buyers at too low of a level (Borg suggests communicating with the CEO if possible); and deal fatigue, which is especially threatening when CEOs try to undertake the selling process themselves. As Borg says of selling individually:
“The failure rate is high, around 80%, and also it’s going to be a hard process, especially if you’re running your own company. For the CEO, it’s like taking on another full time job.”
Obtaining an optimal result requires a fine balance of knowing your company’s worth and not over-valuing it: dealing with one buyer and taking the first offer is a deal killer, but so is ego, greed and arrogance on the part of the seller. It is also important that companies properly research the acquisitions process as well as potential buyers to make sure they are well situated to buy.
Borg asserts that the numbers behind an optimal outcome look like this: a company should have twenty to two-hundred buyer candidates, seven-hundred to one-thousand communications with those candidates, ten to thirty expressions of interest, and five to fifteen NDAs signed. This should leave three to eight qualified partners and, ultimately, one to five offers. Clearly, the scope is broad and the process is intensive. However, Borg reassures sellers that the research, relationships and feedback gained in the process of selling will add value to a company regardless of the outcome.
Borg’s advice for companies looking to sell?:
“Hire an advisor. It might be a little biased, but don’t try to run this process on your own, because it’s really hard.”
This advice comes directly from his own experience, as Borg sold James Concepts without a professional intermediary:
“I sold my company to someone who approached us. We ran that process on our own, without an advisor and sold it to that company. Once we had sold it, one of their biggest competitors approached us and said ‘we were a bit surprised that you were acquired by this company because we would have liked to buy as well.’ So then we understood that we probably left some money on the table.”
Using an advisor will signal to potential buyers both that you are serious about selling, and that they should act fast, as they likely have competition. Ultimately, Borg believes this will situate companies best to navigate the selling process, and to obtain the most advantageous deal.