Making the decision to sell your tech company can be a difficult one. After all, you've invested a lot of time and sweat equity building up your business, and selling it may be emotionally trying. In addition, there's the concern about timing. Are you selling too early, and perhaps leaving money on the table if future offers might be better. Or should you wait, perhaps running the risk of entering an unpromising M&A market. The truth of the matter is it's never too early to test the M&A market.
There are two big benefits of entering the M&A market. First, by going through Corum's M&A process you will likely find there are multiple potential buyers (perhaps some that you never heard of) who can make you an excellent offer. Second, you will learn what your company's actual value is in the market. And if that valuation does not meet your expectations, you always have the option of stepping away from the M&A process ‒ Corum calls this taking a hiatus ‒ and returning when conditions are more favorable to get the results you want.
You will find potential buyers
Corum's experienced team of former software founders and CEOs who have sold and bought many tech companies ‒ a team supported by a global research staff and the world's most extensive knowledgebase of technology companies ‒ has a proven track record of finding the right potential buyers around the globe for its clients.
A recent example proves this point. Corum President, Rob Griggs recently sent out introductory emails to 72 potential buyers about a cybersecurity client. He sent the emails at noon on a Saturday. In the first 45 minutes after sending the emails he received requests for Non-Disclosure Agreements (NDAs) from four interested buyers. By Monday morning that turned into a total of 25 NDAs. The client accepted a highly attractive offer to sell within 90 days of going to market. Of course, each situation is unique, but this example illustrates how the assistance of an experienced advisor like Corum can attract multiple potential buyers.
Another example is an M&A process that Corum shepherded for its client Fing, a leading provider of network scanning and device identification solutions. Fing’s CEO and Board Chairman Domenico Crapanzano and his team grew the company into a global leader in device recognition technology for IoT. Although Fing's expansion was successful, it was exhausting a lot of money ‒ much of it Crapanzano's. He realized that to stimulate more revenue the company needed to monetize the consumer side of the business. Crapanzano said, "I didn't think we had the resources to do that on our own. So it was either go out and raise money, or see what's out there. So I approached Corum mostly to gauge the market. I just wanted to understand whether it made sense to look for external funding to fuel expansion or to part with the company and allow it to go onto the next stage." The initial engagement Crapanzano had with Corum was in March. By April, Corum had developed a list of more than 100 possible suitors for the company and ultimately Fing got six offers. Crapanzano was gratified by the variety of companies that took part in the bidding competition, a few of them Crapanzano had not initially envisioned as suitors. He put it this way, "The interesting thing was that the company made sense to different people for different reasons. Some valued the consumers and the brand, and some valued the technology. We had a wide mix of prospects from those in cybersecurity, IT asset management, retailing, and manufacturing. Most of it was strategic interest. I was pleasantly surprised by the amount of interest that we generated. “ Ultimately, Fing was acquired by Belgium IT asset management company Lansweeper.
You Will learn You Company’s Value
Although Fing wound up with an excellent offer from Lansweeper, Domenico Crapanzano, it’s CEO and Board Chairman, initially approached Corum simply to gauge the M&A market. Other companies have done the same. For example, Clay AIR is a leading provider of AI-powered hand tracking and gesture recognition technology. They were not initially pursuing an M&A. But through an interesting happenstance they decided to test the M&A market with Corum’s assistance and wound up with a compelling offer from Qualcomm, an industry-leading semiconductor company that designs, manufactures, and markets digital wireless telecommunications products and services. Here's how it happened.
Corum Senior Vice President Serge Jonnaert initially encountered Clay AIR at CES, the annual electronics trade show held in Las Vegas. He was fascinated by the company’s technology. Clay AIR had already established a partnership with Qualcomm to integrate their hand tracking and gesture recognition technology into Qualcomm's chipset. They also had an impressive customer list that included Lenovo, Renault, and NXP. Beyond that, Clay AIR had a good market fit and good market recognition. They held patents on their technology, and their hand gesture solutions were seen as excellent. So Jonnaert suggested that Clay AIR test the market, and by doing so, calibrate their market value. If conditions were right for a sale, Clay AIR’s founders could do a deal and reap the financial benefits. Those encouragements led to Clay AIR becoming a Corum client.
Jonnaert got to work quickly and contacted a variety of potential buyers in the industrial arena. However, despite interest in Clay AIR’s potential, there was little interest in an outright purchase of the company. Jonnaert recalls, "We approached a lot of the big industrial strategics, and fairly quickly found that because hand motion and gesture recognition was still an emerging technology, companies were hesitant to consider the company a candidate for acquisition." However, three companies, strategics in the automotive space as well as in the chip and computer interface spaces, did show interest in a commercial relationship with Clay AIR. According to Jonnaert, "They basically came back and instead of offering to buy, they wanted to entertain a commercial relationship like a distribution or licensing deal."
Without an acceptable offer in play for their company, Clay AIR's executives decided to take advantage of Corum’s hiatus option. The time out of the M&A market would give the company the opportunity to see if the commercial opportunities from the three companies would actually materialize. If so, Clay AIR's executives felt it would significantly increase the value of their company.
The time in hiatus was short, but worthwhile. While Clay AIR was on hiatus, they reengaged with Qualcomm to negotiate the next licensing deal. In the process, Qualcomm, not wanting to see Clay AIR's technology end up in the hands of other companies, made overtures for a purchase. In short order, Clay AIR decided to go back to market. Corum then reengaged the other parties that had previously expressed interest. This led to a competitive bidding process in which Qualcomm made an outstanding offer that led to its successful acquisition of Clay AIR.
You can take a hiatus from the M&A process
The Clay Air case underscores the fact that entering an M&A process with Corum does not lock your company into it. You can take advantage of Corum's unique hiatus option and return when conditions are more suitable. In Clay Air's Case, the time out of the M&A market gave the company the opportunity to see if the commercial opportunities from the three companies would actually materialize. If so, Clay AIR's executives felt it would significantly increase the value of their company. And it did, leading to a purchase deal with Qualcomm.
Other companies have used the hiatus to change their structure, product, or business strategy, before returning to the M&A market. For example, Corum client Social5 is social media marketing company that offers small-to-medium size businesses (SMBs) affordable social marketing solutions that help them compete against larger competitors. Their services include graphical design, content creation, social media advertising, blogs, analytics, reputation management, and a scalable content-distribution platform that leverages artificial intelligence.
With Corum’s assistance, Social5 came close to making a deal. But a deal didn’t quite happen. One stumbling block was the difficulty in the Social5 signup process. Customers needed a lot of handholding from Social5 team members to provide the information needed about their company at signup. So Social5 decided to take advantage of Corum's hiatus option. Social5 used the time away from the market to make improvements that would increase their attractiveness to prospective buyers. For example, they automated significant portions of the signup process.
At the same time, Corum created a more pinpointed contact list of over 100 companies. One of those companies was Pluribus Technologies, a technology company that acquires small, profitable business-to-business software companies. Pluribus ultimately acquired Social5.
In another example, Corum client MemberXP, the largest provider of direct credit union member feedback via quantitative and qualitative research in the United States, took advantage of the hiatus option to resolve issues that were preventing the company from receiving attractive offers. After just a few months on hiatus, MemberXP received multiple attractive offers. In fact, a previous bidder, who had initially made a low-ball offer, wound up offering twice as much for the company as they'd offered before. The company was purchased by CU Solutions Group, a credit union service organization majority-owned by the Michigan Credit Union League.
The bottom line is that it's never too early to test the M&A market. Going into the market ‒ even if you don't initially have an interest in selling ‒ can be a very useful opportunity.