Five mistakes to avoid when selling your tech scaleup

When it comes to the UK’s fast-growth companies, research by the Scaleup Institute shows there are three key issues that CEOs are grappling with: access to markets, talent and growth capital. And whilst these issues can be solved organically over time, sometimes the best strategy is to find a strategic or financial buyer that will help accelerate your company’s success. But how do you avoid making a mistake? Hampleton’s analysts set out how to avoid these five mistakes when selling your tech scaleup:

If you are in the early days of growing your company, you might think you’ll never sell. But the best thing to do is to plan as if you MIGHT sell and that means you need to be prepared. 

Ensure you have excellent legal contracts with customers, team members, suppliers and others; good accounting practices and efficient paperwork. This all helps get your company M&A or exit-ready. If you find any issues, get them resolved in advance. That way when potential investors do their due diligence and comb through these documents, everything is in order and does not become an issue to block or devalue the sale. 

If you are in conversations with M&A advisors, this will help you go to market when you need to and speeds up the transaction.

It’s essential to ensure that the company is firing on all cylinders and performing well during the entire M&A process. That way the highest possible valuation for the company can be achieved.

Working closely with your M&A advisors will take up senior management time, but especially at the beginning of the process, good advisors handle much of the preparation work and do the outreach to potential buyers.

The latter part of the process is more time-intensive for the management team, so it’s essential that you think about how to handle that in advance. Plan to delegate key tasks and projects to other executives so that the business keeps running at or above its normal pace - especially when it comes to sales.

What makes a good M&A advisor? The best advisors not only have the right sector expertise and experience, but are creative about how they look at your business and its potential. They are switched on to industry, technological and societal trends so they can see the opportunities you may never have thought of. 

One example of this type of creative thinking at Hampleton Partners was its sale of the connected car software company, Bright Box, to Zurich Insurance, where it will help create new insurance services leveraging telematics-enabled data analytics.

It’s key to understand: how big is the team working on your deal? Who is doing the research, modelling and preparing investment materials? Who will be approaching potential buyers?

Ensure that the deal team leader and the entire team truly understand your technology and have contacts with your potential buyer groups.

As well as technical expertise, it’s also vital to check for a good culture and chemistry fit. M&A advisors who are not only competent, trustworthy, and who understand your vision, but who you will be happy to work with over an intense six to nine months when your business, team and technology will be under scrutiny. 

Hampleton’s senior advisory team are all entrepreneurs in their own right, who have built and sold businesses internationally over the past 25 years of their careers. Hampleton’s team has over 100 successful deals under its belt.

You’ve had a phone call from a company or its advisors. You meet. It’s interested in buying, but wants to lock you down as quickly as possible, providing you with few alternatives.

Make sure you have your own M&A advisor in place so you can resist these "pressure timelines" which can put you at a disadvantage and reduce the final potential sale price.

At Hampleton, we tell the company looking to buy that you are keen to implement a full M&A process to find the right partner for your company, investigating the market and talking with a number of potential partners. Ultimately, you have every right to talk to a number of different buyers, just as they have every right to talk to multiple targets.

The expertise comes in keeping the original company interested and engaged whilst looking for potentially better alternatives.

You need to sell your business at its strongest possible point to get the best offer, whilst also helping the buyer understand where the future potential growth in revenues and value can come from.

Keep an eye on economic trends combined with shifts in societal trends - like the growth in working from home during the pandemic - and relate how your business and technology is best placed to take advantage of these macro and micro moves.

Also make sure you have a healthy and growing roster of happy clients. Spread any future risk by diversifying your customer base, so you are not vulnerable to losing one or two big customers.

Work closely with your M&A advisor to analyse the best time to sell.

Are you thinking about selling your tech business? Talk to our experienced team or to keep up-to-date with the latest technology trends, plus merger and acquisitions activity, subscribe to https://www.hampletonpartners.com/reports/ for free access to 12 Hampleton Partners’ M&A Market Reports every year. 

Read other parts of this series: 

Part 1: Why tech scaleups are key to turbocharging the UK economy

Part 2: Five UK tech scaleups most likely to succeed

Part 3: Are UK scaleups facing a skills gap?

Part 4: Five mistakes to avoid when selling your tech scaleup

Part 5: Thinking about selling your tech scaleup? Here's our countdown to a sale