Hottest Tech M&A Market ever - Will you miss the window?

We are in awe when Warren Buffett, at the lowest woes of the market, says “I’m buying”. What he knows, that we all too often forget, is that life is in cycles.

Currently, real estate is down; everyone wants to rent  instead of own. They are saying that is now a permanent trend. Nonsense. The government doesn’t allow rent to be deducted like interest on your mortgage, so when you have a family, begin making real money, you will want the deduction and a patch of land for your kids to play safely. The banks are backed on new homeowner mortgages by the government so they are glad to lend, and if you go bankrupt, creditors usually can’t take your home. So, home ownership will come back.

Another trend that has me worried is that Tech M&A is the hottest ever, and will just keep going up! Nonsense. Since records have been compiled, we seem to go through some major change every five years or so. The current recession began in 2008; we have been rising, and it’s now 2013. Hmmm?

There is lots that can happen that will derail us. We are at record markets without any true fix in the credit system, and are still propping up the economy with government dollars monthly. Despite all the high fiving over the stock market, does anyone see problems with that? How about the new healthcare program that some say could bankrupt us? Or a global devaluation of the dollar? The next terrorist attack causing real damage?

The point is, things aren’t perfect and we are always vulnerable. When I hear potential sellers say, “Let me wait until next year – I’m sure it will get even better”, I have to interject that peak M&A markets are measured in quarters at best. Just look at 1987, 1990, 2000, 2007, etc. We peaked, then due to a drop in the stock market or disruption in the economy, the confidence went out of the market and the buyers stopped buying.

After the dot com, M&A volume went down 95% and valuations collapsed. Real estate can fall by half, but the value won’t disappear – there’s always a buyer at some price. Not so with tech companies. There can be no buyers at all, and valuation can disappear if you are caught in a market consolidation and tidal change in your market.

The moral: don’t miss this market window to sell at record prices. History shows it takes 5+ years to recover values. Do you want to wait another 5 years? Besides, going out early never hurts you. At a minimum, you will build great partner relationships that will increase your value. And, given the activity, you will likely get multiple offers.

We will talk more about this at the Monthly Global Tech M&A webcast on Nov. 14. To discuss your company's options in today's market, please contact us.

Posted by , CEO on 21 October 2013
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