Introduction

Bruce Milne

Good day to you and welcome to our global tech M&A report for June 2016. I’m Bruce Milne, the CEO of the Corum Group and your host for today.

As you can see from our agenda, we have a lot of ground to cover, starting with some special reports and a few new items to some of you who have been listening in regularly.

Then we will have our research report on deals and valuations that affect you. Finally we have a special report: The ten ways you can increase your value to take advantage of today’s hot M&A market.

Now, let’s get started with your moderator for today, Timothy Goddard.

Timothy Goddard

Thank you, Bruce.

Special Report: European conferences

We do have a great agenda today, and to kick it off we’re going to head across the pond, where Corum VP Jon Scott has some interesting details about some events that we co-sponsored recently. Jon?

Jon Scott

We had great conferences in London and Edinburgh last week on intellectual property. We were asked by Metas Partners, an IP firm based in the UK and in San Francisco to present our thoughts on software M&A and the impact that IP has on valuations and transactions.

We had 40+ people in Edinburgh and about 35 people in London, great conversations, there were lawyers there, companies that have a lot of components of IP in their solutions, so very interesting conference in presenting the materials and we look forward to speaking with some of those folks again.

Timothy Goddard

Thank you, Jon. We are the leading expert on software company valuations as well as the leading M&A educator, and we are increasingly seeing requests for Corum experts to speak at events like this. We recently did an event for a data room supplier, another one with a private equity firm to their base of investments, and one with a strategic acquirer not long ago as well.

I know that we have a lot of tech associations, industry associations, investment groups, and so forth on the call today, and if you would like Corum to speak to your group, we’d be very happy to have you, whether that is live or online. Contact me, timothyg@corumgroup.com or you can reach out through our website, corumgroup.com.

Now we’re going to go to a new regular segment on tech M&A monthly. I’m going to turn things back over to Bruce Milne.

Merger Myths & Misperceptions

Bruce Milne

This month we’re starting a special monthly presentation: Merger Myths and Misperceptions.

The first one we’ll start with is a common one that maybe some of you have heard: The buyer will relocate or fire people.

That makes you reluctant to sell. But in truth, that’s not correct. It may be true in other industries, where they are trying to rationalize costs or merge assets together, but in technology companies, it’s just the opposite. They are often buying you for talent, domain expertise, user bases, technology; they do not want to lose you, they want to keep you.

In fact, a lot of our negotiations are for the post-integration period, keeping the employees. How do we do that? Through stay policies, stay bonuses, completion bonuses, no cut policies, that kind of thing. So that if somebody is dismissed, you have to pay them a severance package. In the US, typically employment agreements are two years, with a three-year non-compete. In Europe and internationally it can be a bit more. So they want to keep you.

This is one misperception that is completely wrong.

Another one that we hear related to this topic is that the buyer will let you and management go.

Again, unless you’ve been doing a terrible job and the company is being sold in a fire sale, that is absolutely not true. Just the opposite. They are trying to buy talent and domain expertise. They want management that knows how to go into a market and create products and services that somebody will buy because the large companies have a hard time doing that themselves. Almost all new technology and products in these companies today are bought. They don’t even try to create them anymore. They don’t have time to. These big companies are now just a collection of acquisitions and they need good talent. So rather than getting rid of you, it’s just the opposite. Often times they will do what they can to keep you, save bonuses and stock options, whatever, to entice you to stay on.

Further, often you will also wind up running a larger operation inside the buyer, which can be very enticing.

So, this is another myth that is wrong. They will not be firing your management.