Beyond Strategic Buyers: 16 Types of Acquirers for Tech Companies

Founders looking to sell their tech company often predict who their buyer will be. But the reality is they're often wrong. Typically, founders think only about potential buyers in their sphere, such as tech companies that build similar products or offer similar services. They don't look at other potential acquirers such as suppliers, customers, or non-tech companies. Actually, there are many different types of potential buyers for a tech company ‒ many more than a seller usually thinks of. 

Over the years, Corum Group has helped sell more software, IT, and technology companies than any other tech M&A advisory firm in history. In doing that, they have dealt with a wide spectrum of buyers. As a seller it's important to understand how big that universe of potential buyers is and realize it represents an extensive range of opportunities for acquisition, merger, or recapitalization of your company.

In its years of advising M&A clients, Corum has identified the following categories of tech company buyers. Understanding how varied this list is and taking advantage of it to find as many potential buyers as possible creates an auction environment and competitive tension that results in an optimal M&A outcome.

Strategic buyers

Strategic buyers are companies that look to acquire another business and integrate it into their existing operations. These are usually the type of buyers sellers think of first when they pursue an M&A. Strategic buyers focus on how an acquisition can improve their competitive position. They may be interested in buying a company to acquire their technology, especially a leading-edge technology like AI or cloud, knowing that it’s too costly and time consuming to develop these organically.  One example is the acquisition of Corum client Payment Components, a financial technology company based in Greece, by payment software firm ACI Worldwide. Payment Components specializes in AI-driven tools that use generative AI and dedicated components to simplify complex financial messaging and payment processes. With the deal, ACI Worldwide was able to integrate these new AI capabilities directly into its cloud-native unified payments platform, ACI Connetic.

There are other reasons strategic buyers look to acquire a company. They may want to access the target company's skilled employees, or their customers, or even buy the company to prevent it from being acquired by a competitor. 

It's also important to understand that a strategic acquirer may come from another business area than your own.  You are likely to find more interested companies when you look outside your own field.

Non-Technology buyers

Increasingly, non-tech companies are buying tech companies to gain a competitive advantage and to avoid relying on the tech companies for critical code or licensing. Non-tech companies are steadily increasing their activity in tech M&A, as digital transformation becomes essential across all industries.

As is the case for strategic buyers, non-tech buyers acquire tech companies to update their operations with leading-edge technologies and platforms instead of building them from scratch. They also do it to diversify their offerings. Consider Bosch Group's acquisition of Corum client Inubit AG. At the time, Bosch was primarily an engineering company based in Germany. Its purchase of Inubit, a German supplier of comprehensive, enterprise-level Business Process Management solutions in Europe, was primarily to expand into Internet of Things (IoT) and web-based enterprise services.

Another example is Brother Industries, a Japanese electronics and electrical equipment company whose purchase of Corum client Nefsis Corporation, a provider of web-based remote collaboration and conferencing software, was designed to diversify Brother's portfolio away from hardware dependency and pivot into cloud-based software services.

Private Equity firms

Private Equity (PE) firms currently hold trillions of dollars in dry powder that they must invest to generate returns for their investors. They are currently deploying hundreds of billions of dollars in tech sector acquisitions, looking to sell them later for a profit. Many of these acquisitions are roll-ups, where a PE firm buys smaller tech companies and merges them into a larger platform company in the same industry to grab more market share. For instance, when PE firm TA Associates acquired Corum client VIA Information Tools, the developer of the Man-IT manufacturing execution system, it was rolled up with five other distinct software companies to build the foundation for Advantive, a platform that provides mission-critical software for specialty manufacturers and distributors. 

PE firms frequently look to invest in high-growth tech companies that often scale fast and offer strong profit margins. That drove the purchase of Corum client Flexagon, a leading provider of DevOps software, by PE firm Main Capital Partners ‒ a deal that expanded Main's footprint in the high-growth enterprise DevOps and infrastructure software market.

PE portfolio companies

Companies that are in private equity portfolios have become some of the most active buyers in the market. These companies are doing bolt-on and tuck-in acquisitions in nearly every sector, hunting for products, verticals, or geographic expansion to scale their business. And because the parent PE firm backs these acquisitions, it can reduce financing risk and streamline the decision-making process. 

One example is the bolt-on acquisition of Corum client Eccovia by CaseWorthy. Eccovia is a software and services company that provides innovative case management and data analytics solutions to social and human services providers. CaseWorthy, a case management software provider backed by private equity firm STG, looked to expand its software platform with an acquisition of a complementary industry-leading product. It accomplished that by integrating Eccovia's functionality, resulting in one of the largest purpose-built case-management platforms in the industry.

Customers

Don't overlook your customers ‒ the companies that use what your company offers ‒ as potential buyers. They may want to acquire your company to ensure they continue having access to the critical technologies and tools that you provide and not lose them if a competitor buys your company and cuts off access to those critical assets. They may also be interested in acquiring your company to reduce their reliance on an outside vendor and the risk of that vendor raising prices, changing terms, or going out of business.

There are many examples of a tech company acquired by one of its customers. For instance, before news agency Reuters purchased Corum client Equis International, it was an Equis customer. Equis is a vendor of technical analysis software aimed at individual investors. Prior to the acquisition, the two companies had already built a successful commercial relationship. Equis integrated Reuters' end-of-day data feed (called Reuters DataLink) directly into its popular financial charting software, MetaStock. That relationship drove the acquisition, which turned Equis into Reuters' internal center of excellence for market graphics and technical charting. The deal also meant that instead of continually licensing third-party analytical tools, Reuters now had Equis' proprietary charting technology to build out its own backend infrastructure.

Suppliers

Your suppliers ‒ the companies that provide components or technologies for your products and services ‒ represent yet another source of potential buyers. Suppliers often want to transition from being a low-margin commodity provider to a higher-value solutions provider. Acquiring a tech company gives them ready-made brand recognition, intellectual property, and finished products. And by acquiring that tech company it locks in the company for the supplier's components or technologies, protecting the supplier from market downturns or competitor poaching.

A classic example of this is a supplier acquiring a key customer's company to cement a market pivot. This occurred when AdHawk, an adtech and software supplier, acquired one of its customers, FloorForce, a company that provides a digital marketing and website platform built specifically for the flooring industry. AdHawk noticed that a specific customer segment, flooring retailers using their tools, had dramatically better retention and engagement than anyone else. So they acquired FloorForce, turning itself from a general vendor into a dedicated vertical software company.

Competitors

Competitors can be buyers too. In fact, often the initial overture to a founder about selling their company comes from a competitor. There are various reasons why a competitor might want to buy your tech company. They may want to gain control over the specific niche you and their company are in. They may want to add your products and services to their offerings. They may want to secure your intellectual property so others can’t use it. Or they may want to grab your customer base.

One example is Corum client Azpiral, an Irish developer of a customer engagement platform, selling to PDI, a provider of enterprise management software for the convenience retail and petroleum wholesale industries. PDI was already a dominant provider in North America, while Azpiral was well-established in the EMEA (Europe, Middle East, and Africa) market. Rather than trying to win market share from one another, PDI acquired Azpiral to use its existing CRM infrastructure as a launchpad to scale its consumer engagement segment beyond North America.

Channel Partners

Your channel partners, such as distributors, dealers, ISVs, OEMs, and licensees, are another possible source of buyers. They may want to buy your company to secure product control, protect their revenue streams, and eliminate reliance on an external vendor. Or they many want to own your product and in that way get 100% of the profits instead of splitting commissions or margins with you.

The acquisition of Axcient, a disaster recovery and data protection software provider, and SkyKick, a cloud backup and management software provider, by ConnectWise, an IT and managed services software/service platform represents this type of deal. Axcient and SkyKick historically sold their backup and security solutions through channel partners such as MSPs. When ConnectWise, an ecosystem partner in the channel, acquired them, it brought these software vendors directly into its broad partner-management portfolio.

Companies reinventing themselves

Tech M&As are heavily driven by companies reinventing themselves because buying an existing business is the fastest way to execute a radical strategic pivot. Consider Sumpo Food/Leyou Technologies, a Chinese poultry company that acquired a controlling interest in Digital Extremes, a Canadian gaming studio for roughly $73 million. Why would a poultry company buy a gaming studio? Poultry farming faced volatile feed costs and cyclical profit margins, and video games offered high-growth digital revenue to stabilize the company's financial portfolio.

Foreign buyers

Foreign buyers represent a significant growing segment of tech company acquirers. In fact, half of Corum Group's transactions involve buyers and sellers in different countries across the globe. Foreign buyers acquire tech companies to gain fast access to advanced innovations, new geographic markets, and specialized talent without building them from scratch. One recent example is the sale of Corum client ACAD-Plus, a U.S.-based provider of Computer-Aided Facilities Management (CAFM) solutions, to Swedish technology company Addnode Group. The deal expands Addnode's Design Management division's capabilities in digital lifecycle management and facility software, and extends its presence in the U.S. public sector market.

Public companies

Public companies are under pressure to show growth that meets investor expectations. Organic growth alone usually isn't enough, so they turn to acquisitions. One example is the acquisition of Corum client Stonehenge Care, which was an independent private company, by The Ensign Group, a publicly traded corporation that invests in healthcare companies providing skilled nursing, rehabilitative care, and senior living services. The deal added seven skilled nursing facilities from Stonehenge in Utah, expanding Ensign Group's footprint there.

Disruption-Driven Buyers

Sometimes major shifts in technology or regulation can force a tech company to sell. There are buyers waiting to take advantage of that opportunity. The disruption of AI, in particular, is forcing some traditional software and services providers to weigh strategic alternatives, including selling. On example is the sale of Nuance Communications to Microsoft. Nuance was the dominant player in pure-play speech recognition—even powering the early versions of Apple’s Siri.  However, as big tech companies built robust in-house natural language processing (NLP) and integrated voice capabilities directly into their cloud suites, selling standalone transcription software became a less viable long-term business model. Rather than fighting the shift toward integrated platform AI, Nuance chose to sell to Microsoft in a $19.7 billion deal.

Holding Companies

Holding companies are corporate entities that do not produce goods or services directly, but own or control various subsidiary technology businesses. Holding companies are excellent potential buyers of tech companies because they offer financial scale and independent operation. Usually a holding company allows a tech company that it acquires to operate independently so it can retain its employees and culture. Unlike PE firms that look to sell acquisitions after a few years, holding companies typically have a longer-term investment approach, where they hold on to an acquired company as long as decades or even permanently. One recent example of a sale to this type of acquirer was the purchase of Corum client Suplos by "buy-and-hold" company Vesta Software Group.

Search Funds

Search Funds. Search funds are another intriguing source of buyers.  A search fund is an investment vehicle where an entrepreneur (known as a "searcher") raises money from investors to identify and acquire a company, which the searcher then typically runs as the CEO. Searchers are often recent MBA graduates and may not have the technical expertise to run something as complicated as a tech company, but many do bring valuable experience to the table in scenarios where technical founders have established a solid product foundation. Because search funds typically value existing staff and local footprints and don't gut or immediately relocate teams, they give tech founders peace of mind that daily operations and culture are actively stewarded. A good example of this is the $10.4 million acquisition of IT infrastructure and hybrid cloud provider OnRamp Access by search fund Brown Robin Capital.

Sovereign and Economic-Development Buyers

Sovereign wealth funds (SWFs) are state owned investment funds. Often these funds are created when a country has budget surpluses or large revenues from natural resources like oil or gas. These funds present excellent opportunities for sellers because SWFs typically have the deep pockets to make very large M&A deals. A prime example is the recent $55 billion buyout of video game publisher Electronic Arts by a consortium led by Saudi Arabia’s Public Investment Fund (PIF). SWFs also invest for the long term and are willing to buy companies that have a longer growth path.

You should also consider economic development buyers. These are buyers interested in acquiring a tech company for the economic benefit of a group or entity that they represent. For example, a tribal group might acquire a tech company to diversify its economic portfolio and make high-paying jobs available for tribal members. This was the case when payroll software company and Corum client Cort Directions was acquired by Infinium Software. Infinium then took the parts of the company that it wanted and sold the company to Warm Spring Ventures, a tribal organization, which did the deal to preserve local jobs near its reservation.

Family Funds and Private Investors

Buyers of tech companies do not necessarily represent companies or organizations. Sometimes they can be family funds (called family offices) that manage investments and other financial dealings for wealthy families. Family offices represent yet another type of potential buyer. Some of the largest family offices, those backed by billionaires, manage massive pools of capital and occasionally execute direct buyouts or large strategic acquisitions. However, most family offices usually take minority equity positions in tech companies. They look for high returns but usually have a longer-term mindset that allows them to wait years for that return.

Individual investors, specifically wealthy entrepreneurs, angel investors, or high-net-worth individuals, can also be potential buyers, especially of smaller or early-stage tech companies, as they look for opportunities that have low entry costs but high growth potential.

Work with Corum

If you would like help thinking through which of these categories fit your situation, that's exactly the kind of conversation Corum's M&A advisors have with founders every day. They are available to walk through it with you.