M&A strategy in a disrupted market

During the last two weeks we have been in daily conversations with corporate development and investment professionals in the course of our transactional work. We have added a layer to the conversation, questioning and listening, as we continue to assess the impact of COVID-19 on the tech M&A marketplace.

We are working on transactions at different stages in the cycle, from first call to final negotiations on the contract.

We have also been filtering the messaging from our financial advisers, sector professionals, and colleagues. Every day brings a new data set, and every wave of data hints at more to come. Because we do only one thing – sell technology companies – we are processing all of these inputs in the context of adding maximum value to our clients. We are not medical experts or equity traders, but I have worked in tech M&A through the dot.com crash and the 2008 financial crisis. That doesn’t give me a crystal ball, but it does mean that I have seen patterns in prior crises that were foreshadowed specific outcomes.

As of late March, 2020, here is our view:

1) Consolidation favors survival in a disrupted markets, and is especially valuable to small companies. Companies that join forces have more scale, diversity and resilience. Whether we are heading into a prolonged bear market, or a “blip”, M&A will be the single most important strategy available to mid-market company leaders.

2) Deals in the tech segments are progressing, and closing. Objects in motion tend to stay in motion. Investors and boards are meeting daily to assess costs, strategy, and forecasts, but we have not seen wholesale abandonment of transactions, except in highly impacted segments like travel and energy.

3) Systemic changes in the technology markets make us initially more resilient to disruption than was the case in the dot.com and, to a lesser extent, the financial crisis. As private equity has taken over the growth stage of the market, there are fewer small public tech companies getting whipsawed by dynamic markets, and more PE-backed companies setting pragmatic (albeit conservative) strategies.

We are realistic about the dynamic nature of the market. Market cycles put some companies out of business, and establish others as market leaders. Our clients are managing risk, while we work with them to create opportunities for them to lead their segments.

We wish you well. We are here to help.

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