A common misconception from companies contemplating an exit is that M&A has dried up as the venture and IPO markets have. This is not to say that M&A hasnt been affected by the current market conditions, but dried up? No. Case in point, 2008 technology-centric deal volume was down 22% from the previous year, but taking into account the absence of private equity buyers, whose deal volumes dropped by over 70% during the same period, quickly explains a primary factor for this modest decline. Even though private equity buyers have taken a step back, their portfolio companies and the robust strategic buyer community remain active as M&A continues to be a predominant component of most strategic growth strategies. This propensity to acquire, at a minimum, should sustain current M&A volumes which are comparable to levels seen in 2005.

The credit crisis has evolved into a global recession, perhaps even a depression, and while the impact of this crisis on global M&A can be felt in every industry, the technology M&A market has not sustained a direct hit. Technology M&A will maintain buyers, especially as those with large cash reserves continue to build and be opportunistic. From the buyers perspective, M&A has long been a vehicle for growth and expansion and will continue to be, even during turbulent economic times.

In todays market there are a seemingly endless number of variables at play which may or may not lead to an acquisition, but now is a good time to test the market. Most successful buyers are buying now not because valuations are down, but rather to continue executing planned strategic initiatives. In other words, buyers are targeting opportunities that possess needed technology, skills, market penetration, geographical presence, etc. Whatever the reason, buyers are actively shopping, and although we see opportunity for companies looking to exit, how long that window will remain open is anyones guess.

As strategic initiatives turn into acquisition headlines, what happens next? Typically nothing. Business-as-usual for the seller. Ultimately buyers work very hard to minimize disruption to the acquired entity in an effort to maintain continuity and momentum a process which actually starts well before the actual closing. Assuming the sale is executed in a professional process and synergies are strong, one could assume selling shareholders have received consideration deemed to be market or better and have established healthy relationships with the new owner. These relationships are vital to the future success of the acquisition, especially if the deal is structured with some form of earn-out or contingent payment. Employees, after a quick sigh of relief learning they wont be relocated (as this almost never happens), are busy integrating and transitioning. Meanwhile, customers are being updated on new product offerings and service plans available to them. The customer base is a key asset in most every acquisition, so the transition and any possible migrations need to be dealt with carefully.

Cisco Systems is a prime example of an active buyer with a long history of successful M&A transactions, from pre-revenue start ups to multi-billion dollar market leaders. Since the early 90s, Cisco has completed well over 100 transactions, and because they only acquire companies which are in line with their strategic direction and work hard to retain key employees, their track record of successful M&A is highly regarded in the industry. Not every acquisition goes smoothly, but after the dot-com bust, buyers have refined their M&A processes and work very hard to ensure success.

M&A has and will continue to play a major role in the evolution of the software and IT landscape. Buyers will be opportunistic and acquire synergistic assets to fill voids in product lines, markets, geographies and technologies with smaller, nimble, technologically savvy companies maybe a company like yours.

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