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

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. 

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. 

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.

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

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/.