10 Golden Rules to Writing an M&A Executive Summary

August 2019 Tech M&A Monthly - Introduction

Tim Goddard

Good morning, afternoon, or evening, wherever you are in the world. Welcome to Tech M&A monthly for the month of August 2019. I'm Timothy Goddard, EVP of Marketing here at Corum Group, your host for this event.

Lots to get to, as usual, today. So, let's jump right in. Taking a look at our agenda, we've got a few big announcements here at Corum from myself and then Steve Jones, and we'll go to Lonnie Schilling for a report from the field. Then we'll have a field report from Dr. Ivan Ruzic regarding his recent market spotlight on AI enablement. Following that, we'll dive into our monthly Tech M&A report and we'll have a special report on the 10 golden rules for a tech M&A executive summary.

If we have time, we'll wrap with Q&A from the audience. So, be sure to get your questions in it anytime as we go along and regardless, we'll try to follow up with you one way or the other.

 

Announcement: Tech M&A Resource Center Launch

Tim Goddard

So, let's get right to it. First, I'd like to announce the release of the Tech M&A Resource Center. We've recently done an overhaul on corumgroup.com and the most significant change is this new resource center where decades of Corum's experience doing deals and running educational conferences has been organized into a single hub organized by topic. Everything from preparation for M&A, to buyer contact, to valuations, and financials, much, much more. It includes past and future webcasts, blog posts, news articles, many other types of media, and we'll be constantly adding new content and categorizing older content as we move forward. So, you'll want to make it a regular habit to stop by and see what's new.

And of course, if you want to learn more about any of the topics, we invite you to attend one of our live events, also available on the website, or reach out directly at info@corumgroup.com. There are a lot of other great resources on the new site as well, including detailed pages on our deal makers, transactions, and more. I hope you'll check it out.

 

MemberXP-CU Solutions Group Acquisition

Tim Goddard

Next, the newest of those transactions that we've got profiled, over to Steve Jones based in Salt Lake City. Steve?

Steve Jones

Thanks, Tim. Excited to share that our client MemberXP out of Denver, Colorado was recently acquired by CU Solutions Group out of Michigan. MemberXP is the largest provider for credit unions who are looking for customer engagement or customer feedback as they interact with credit union service representatives. Unique differentiation here is that MemberXP provides actionable plans based on direct customer feedback to help improve that interaction.

The buyer, CU Solutions Group, is a credit union service organization owned by the Michigan Credit Union League. And their vision is to create industry-leading solutions based on actionable insights from that data and support multi-channel interactions with credit union members. It's a perfect fit. We're excited that these companies came together.

We express our congratulations to MemberXP founder, Constance Anderson, who is an inspiring executive and well-renowned leader in the credit union market. So thrilled for the outcome here at this transaction.

Tim Goddard

Thanks, Steve. Congratulations to you and everyone else involved.

 

Internet of Things: Corum Group at the Everything is Connected Conference Report

Tim Goddard

Next up, Lonnie Schilling based in New York. Lonnie, you recently gave a keynote address on the Internet of Things. Can you tell us about that?

Lonnie Schilling

This presentation was given at the Practicing Law Institutes Internet of Things 2019, Everything is Connected Conference. The presentation was entitled "IoT Market Overview and Investment".

The Internet of Things as a core part of the fourth industrial revolution where ubiquitous electronic objects are equipped with identifying, sensing, and internet communications abilities, which enables massive scale of data collection and processing to accomplish previously unforeseen objectives. For many companies using M&A to accelerate delivery of an IoT-focused product vision is an important offensive strategy in protecting their market position against the competition.

Others recognize the IoT wave as an opportunity to leapfrog competitors too. For these companies, strategic imperative often demands the use of M&A as a critical tool in delivering on their IoT-led growth strategy, which in turn delivers the capabilities needed to be successful. That preparation isn't just for tech companies but also for non-technical acquirers or participating too. As is often the case, technology presents opportunities but requires legal counsel to navigate or possibly create legal framework to allow IoT to achieve its potential.

Tim Goddard

Thanks, Lonnie.

 

WFS Market Spotlight on AI Enablement Spotlight

Tim Goddard

Thanks, Lonnie. Next up, we have Dr. Ivan Ruzic who recently finished a WFS market spotlight about AI enablement. Ivan, take it away.

Ivan Ruzic

Last week, I had the chance to spotlight mergers and acquisitions in artificial intelligence, specifically what's changed since the last time we visited AI in late 2017. I did a deep dive into the buyer community discussing the changes across the technology, media & entertainment, and telecom sectors. And hosted our AI panel featuring industry luminaries, Andrew Dubois, COO from Tulco Labs; Richard Yawn, CTO at Kim Technologies; and Greg Pelton, CPO at Pryon. AI will touch all of our lives. I strongly encourage everyone to watch the 30-minute spotlight in its entirety at WFS.com. Thanks.

Tim Goddard

Thanks, Ivan.

 

August 2019 Tech M&A Report: Public Markets and Corum Index

Tim Goddard

Now, over to the Corum Research Team led by Elon Gasper. Elon?

Elon Gasper

Thanks, Tim. We begin with the public markets where a major US indices set new record highs again in July. International markets were mixed. Chinese pullbacks notable given this month's follow-on action. July ended with the Fed in lowering US interest rates for the first time in over a decade and promising to support this longest US economic expansion and bull market ever.

The tech M&A window remained open with high, though price discipline buyer demand chasing a limited supply of sellers as reflected in our Corum Index, which showed a decrease in year-over-year volume and megadeals, but the PEs found more platform deals to do and more VCs, smart money kept adding to the exits.

 

August 2019 Tech M&A Report: Megadeals Trend

Elon Gasper

The megadeals occurred in almost all sectors with an Internet transaction taking that sector up to third highest in value for the first time in years as Just Eat was gobbled up for more than $6 billion by Takeaway.com to fend off increasing competition from Uber Eats and Deliveroo in Europe.

Elon Gasper

We'll hear about other megadeals as we go through the sectors starting with vertical. Yasmin?

 

August 2019 Vertical Sector Tech M&A Report: Biotech and HealthTech

Yasmin Khodamoradi

Vertical multiples are at record highs reaching 5.8 times revenue and 23 times EBITDA after rising 7% and 10%, respectively in the last month.

In terms of megadeals, life sciences instruments maker, BioTek Instruments, was acquired for $1.2 billion by Agilent Technologies to strengthen its position in the live-cell analysis market. Other biotech deals included OncoImmunity, an AI-based cancer bioinformatics company, that was picked up by NEC, and pre-clinical and molecular imaging software developer, PMOD Technologies, which was bought by medical instruments maker, Bruker.

In the patient engagement field, Citra Health Solutions' telehealth and engagement subsidiary was taken over by healthcare engagement specialist, Carenet Health. Shortly after, Royal Phillips pocketed health messaging startup, Medumo to go its portfolio of patient management solutions in the US.

Elsewhere in the healthcare space, Digitize.AI, a company developing AI-enabled prior authorization tools was purchased by revenue cycle tech developer, Waystar, continuing its buying spree in machine learning and artificial intelligence. And dental software developer OrisLine Group was bought by Henry Schein, marking its entry into the Italian market.

 

August 2019 Retail Tech M&A Report

Yasmin Khodamoradi

We also saw a number of smart retail deals last month. Analytics software developer, Retail Insight, was bought by Ventiga Capital Partners, and fashion AI company, Retviews was acquired for $9 million by digital transformation company, Lectra, for its real-time market data analysis algorithms.

French AI image recognition from Planorama, was pocketed by Singapore-based retail tech startup Trax to compliment it's in-store execution tools portfolio. And retail ERP developer, Windward Software was acquired by Volaris Group.

August 2019 Tech M&A Report: Automotive Sector Deals

Yasmin Khodamoradi

Finally, on automotive, Ford capped off the month with the purchase of Quantum Signal which develops autonomous vehicle systems, and Journey Holdings, which provides vehicle tracking systems for public transportation, to further its ambitions of developing self-driving cars and expanding into public mobility services.

How did the consumer sector fair, Stephanie?

 

August 2019 Consumer Sector Tech M&A Report

Stephanie Jensen

Consumer sales multiples fell significantly while EBITDA multiples rose showing this market shifting to value proven profitable models more than top line growth, in sync with signs of that trend in other non-enterprise sectors last month too.

As we mentioned last month, PE firm KKR purchased veteran graphic software maker, Corel, for over $1 billion, reportedly. This includes both its longstanding personal creative products as well as Corel's recently acquired Seattle-based virtualization firm, Parallels.

 

August 2019 Report: Gaming and Music Tech M&A

Stephanie Jensen

Moving to the gaming world, UK betting affiliate, Max Free Bets, was purchased for $2.5 million by Net Gaming to strengthen its i-gaming affiliate business in the UK.

And Denmark-based online casino operators, CEGO, was sold to Via Equity. Also in Denmark, video game peripherals and software makers, SteelSeries, was picked up by PE firm Axcel.

And in Sweden, Embark Studios was acquired for $96 million by Asian publisher, Nexon, which hopes to expand its reach in western gaming markets.

Finally, music AI startup, Jukedeck, was acquired by social media and music app, TikTok, which is owned by Chinese tech heavyweight, ByteDance, in a move that could put it in direct competition with Tencent Music and Spotify.

 

August 2019 IT Services M&A Report: Cybersecurity Subsector

Stephanie Jensen

How the IT services sector do, Anna?

Anna Lebedieva

IT services multiples remain stable near all-time highs driven by translated focused IT services, in particular reflecting the need for highly trained specialists. Bain Capital continued its summer shopping spree with $2 million acquisition on WPP’s data and insight consultancy, Kantar.

In the cybersecurity subsector, cyber R&D firm, Siege Technologies, was bought by Braes Capital in a push to gain access to the federal cyber market. Navy cybersecurity provider, PGFM Solutions, was grabbed by defense engineering specialist, Gryphon Technologies, trying to roll in its capabilities, focused on shipboard military control systems.

 

August 2019 US Government IT M&A Report

Anna Lebedieva

In the US government IT market, mission-focused and analytics specialists, Altamira Technologies, was bought by a PE group led by ClearSky. And open source software developer, Connexta, was pocketed by federal IT constructor, Octo Consulting, to bolster its open source and Agile software development capabilities.

MSM Security Services divested its US-based risk management for almost $11 million to federal security services provider, Securitas, which aims to expand its federal background investigation business.

 

August 2019 IT Services M&A Report

Anna Lebedieva

In the health security services domain, Wisconsin-based agency, Fresh Digital, was bought by Legato Healthcare Marketing, planning to extend its reach to new markets. Revenue cycle management firm, IMedX, rolled up two healthcare and analytics and RCM specialist, Prevalent and Axcension to launch an advanced healthcare analytics platform.

Real estate software consultancy and Salesforce partner, One11 Advisors, was acquired by Altus Group to extend its software consulting services. Salesforce and digital strategy agency Bowfin was purchased by a customer experience agency, Rightpoint, to magnify its Salesforce expertise.

In New Zealand, digital transformation consultancy, Davanti, was purchased by Dentsu to accelerate its development of its salesforce capabilities. And Australian data management expert, Neodata, was snatched by Deloitte to build up its Oracle practice.

Elon Gasper

And here's the first megadeal of August. Fintech, Refinitiv, with its many former Thompson Reuters data sets and software tools, acquired for $14 billion by the London Stock Exchange.

Back to you Tim.

 

10 Golden Rules for a Tech M&A Executive Summary

Tim Goddard

Thanks, everyone. Lots going on even in the middle of the summer. The next step, to present our special report on writing for Tech M&A, I'd like to introduce Corum's Chairman, Jon Scott out of Edinburgh. Jon?

Jon Scott

Last month, we focused on building the buyers' list and the contact, but as we highlighted, how you contact is critical -- communicating the story, the vision of your company. This is captured in the executive summary, that written document that you present to your potential buyers right at the beginning of the contact phase. This is the first major step in a multistage process to engage and qualify potential buyers and to create an auction type environment. We've merely touched on the executive summary in our last few monthly reports.

Now, it's time for a deep dive. At Corum, our executive summaries are crafted by former CEOs who sold their own companies, backed by a team of researchers, go-to market experts, and professional writers. We train constantly on this because we know that great writing gets great results.

After decades of successful exits, here's what we've deemed the top 10 golden rules for writing the executive summary.

 

Executive Summary Rule #1 – Keeping it Brief

Rob Schram

Number one, keep it brief. Less is definitely more.

The potential buyer only needs enough compelling information to realize that the company is a must-have and to create a sense of urgency and engaging with a Corum deal maker, who will then get you to the management presentation stage and give you a chance to shine. We spoke about this in our special report on getting the buyer's attention. Many sellers want to include every detail about their company and product in the executive summary.

Remember, the book full of drive financials, endless volume that never gets read. The executive summary is nothing like this. It should be in the range of eight pages and the buyer should be able to grasp the crucial themes and the opportunity quickly.

Think of it as a captivating movie trailer. You only get a few minutes of their attention, so use it wisely. Don't hand your buyer a novel or a history lesson.

 

Executive Summary Rule #2 – Clear Value Statement

Serge Jonnaert

Number two, open with a clear value statement.

It lives in that first paragraph of the first page of your executive summary and it is absolutely the most important part of your message. In those first few sentences, the buyer should know exactly what the company does and what makes it special. Something like first mover technology, a rapidly growing customer base, name brand customers or white hat market and use a couple of words to describe the overall market opportunity.

Tell the whole story in one paragraph and find a way to showcase your company's greatest strength right up front. The person reading your executive summary will decide within those first few lines if they will read it until the end and all.

So, make that best impression you can right up front. Use big numbers, important names, make bold claims.

There is absolutely no room for fluff here and don't forget to show passion. That's the energy that brings to life your executive summary and helps it stand out even while remaining serious and businesslike. Seek those moments of originality that stick to the mind while communicating your message. They could be a clever but not distracting turn of phrase, a simple but on target metaphor, or it just could be a successful hook. Something that relates a complex matter to a simpler and more timely one.

 

Executive Summary Rule #3 – Tell a One-Page Story

David Levine

Number three, tell the whole story in one page.

Once you've caught their interest with your opening statement, don't waste their time. Find the important, memorable differences separating your company from the hundreds of others at the corporate development officer as looked at recently. Talk about the essentials and make sure everything they need is on the first page -- market opportunity, growth, potential competition, patents, partnerships, data.

Keep the specifics light as you don't have room to go into detail. And again, never longer than one page.

 

Executive Summary Rule #4 – Align with Success

Ian Thurbon

Number four, align yourself with success.

We see clients missing this one all the time. If your customer list includes some of the biggest Fortune 500 companies, make it known. A strong customer list validate your product, service, and your company's reputation. If a multi-billion dollar company trusts you with their business, it says something and then leaves an impression with the potential buyers. And don't forget the partnerships, technical distributors, and resellers can fill in the gap here if the company is new and is not built out a customer base.

And other angle is geographical reach, either regionally, nationwide, or internationally.

 

Executive Summary Rule #5 – Disruptive Trends and Best Practices

Dan Bernstein

Number five, map to disruptive trends and best practices. Is your company writing the next big technology wave or treading water?

The key theme here is timing. By aligning yourself with the biggest tech trends on the market, you align yourself with opportunity. That's what buyers are looking for -- vision, future growth. You can't catch up to a wave. You can only get in front of it. Show them why your company's perfectly aligned to capture the moment before it passes.

Identifying and mapping yourself to these trends, however, is difficult. Corum's research team is gathering thousands of market data points every day around the clock to pinpoint that next big wave in tech M&A.

Get it right and you'll grab your buyer's attention. Get it wrong and your executive summary is heading for the waste bin.

Executive Summary Rule #6 – No to History Lesson

Steve Jones

Number six, don't give a history lesson on the company.

We understand that your company has a rich history that's worth talking about. That legacy is something to be proud of. However, when you're trying to grab the attention of a buyer, you need to focus on the now and the future and what's on the horizon.

The executive summary is not there to trace the origins of your company or its products, but rather to speak to its present value and greater potential that lies ahead. The founding of your company, its various pivots and past successes are unlikely to be centrally important to the topic at hand.

That being said, the executive summary is not a venture capital pitch either focused entirely on future potential. The future of the company is of vital importance, but it must be rooted in currently visible factors and traction, growth, customers, current trends, et cetera.

So, a brief paragraph or two by the company's founding is all it's really needed here. Anything unique or unusual can be included, but that's it. Nothing more. Save your war stories for entertainment next time you're at dinner with a potential buyer.

 

Executive Summary Rule #7 – Don’t Deep Dive on Technology

Martin Lowrie

Number seven, don't do a deep dive on technology.

To a degree, this relates back to opening with a clear value statement. We see this slip up all the time where a client will dive into their tech stack, their database provider, their coding language, and worst of all, they do it right off the bat. Dead wrong. The CEOs reading your executive summary are less concerned with the details and much more concerned with what the product does and the impact and potential on their future results.

So, only a brief technology overview is needed. For example, at most, you might say that your architecture is software agnostic. This highlights the opportunity for future business rather than the code itself. Don't worry, there'll be plenty of time to get into the hard work and magic you've put into your product, but that comes later.

 

Executive Summary Rule #8 – Sell the Company, Not the Product

Arnaud Vivers

Number eight, sell the company, not the product.

Again, CEOs know their product, service engineering, the internal process down to a T. They're used to setting their product or service to customers, but the executive summary is not about selling your product, period. Avoid writing your value proposition as your customers would hear it.

Instead, anchor your position in features unique to your company. The specific combination of market position, financials, quality of customers, team, or IP that your firm alone provides. Talk about the people, the organization, and the ideas that will move a buyer's business to the next level.

What makes the company different from competitors? Does the company have a substantial market share, growth rates, amazing sales pipeline, a team full of industry experts that will be staying on after the sale, a patent portfolio, low churn? Sell your company.

 

Executive Summary Rule #9 – Catch the Reader’s Eye

Lonnie Schillinh

And number nine, catch the reader's eye.

Big numbers, important names. Just like what we said about customer list. Use this as an opportunity to highlight some of your biggest performance figures. Any kind of number you can throw out is useful.

Does the client make 50% of its sales through distribution, solid growth forecast, double digit market growth, number of clients, locations, multiple languages, and currencies? Are you capturing a multi-billion dollar market? Are you a global player? What puts you in that position?

Put your biggest strengths high and clear and be bold.

 

Executive Summary Rule #10 – State your Why’s

Rob Griggs

And finally, number 10. State why you are going to market, why now?

Tell a clear, positive story about why you are going to market. You want the future to look bright for your company and eventually your buyer. What aspects do you do very well and where do you need help? You might have an excellent product or service and you've done the hard work with engineering and maybe you need the marketing and sales force power of an acquisition partner to take it to the next level.

Always look to the positive. How will this deal be a big gain for everyone involved? This is missed all the time. State this right up front. It is certainly a question that every potential buyer will want answered.

 

10 Golden Rules of the Executive Summary – Final Takeaway

Jon Scott

Excellent. Thanks, everyone.

One final point you need to take away is that without a team of experienced advisers, deal makers, and researchers helping you, your executive summary will miss the mark. Why is that? Because no one is a bigger fan of your product than you and your team, especially after all you've spent the time and the years championing your product or service, and this can make it difficult to see from the perspective of many unique outside buyers of your company.

Your message has to be on point, your aim has to be near perfect. You only get this opportunity once and then it's gone. Remember, this is the biggest financial decision of your life. The right team and the right process will help you do it right.

Tim, back to you.

Tim Goddard

Thanks, Jon and to everyone who participated. Really excellent advice.

 

August 2019 Tech M&A Monthly: Q&A

Tim Goddard

It looks like we've got time for one question. Let's go with this one.

You've talked a lot about positioning, but not a lot about financials. How important are financials in an executive summary?

So, briefly, I would say moderately important. If you're a small company, you're not going to want to try to hide that fact, but regardless of size, you want to find a buyer who's going to value the opportunity you represent, above and beyond your current revenue and EBITDA numbers. So, in your initial conversations, including the executive summary, you're definitely going to focus on those broader strategic things that we've discussed today. You want to catch the attention from the right buyers so that regardless of financials, they at least need to take a second look.

Tim Goddard

Alright, that brings us to the end of our time. To learn more about any of this, do check out the Tech M&A Resource Center and hopefully we can meet up with you at one of our upcoming live events.

With that, let's go to our close.