THE PARADOX OF TECH M&A
A successful tech M&A firm sells companies that are not for sale to people who are not in the business of buying companies. Small technology companies have value to a wide number of industry partners, many of whom do not have active M&A programs or have M&A teams that are dedicated to larger transactions. They want to become heroes on the heels of the next billion-dollar deal, and they will ignore the strategic tuck-ins that might deliver value on a smaller scale.
As a result, we have to engage in deep research on the buying companies, working hard to locate people who potentially have an interest in that technology or transaction but do not show up in commercial M&A databases. And it’s also important to present sellers from a position of strength – not companies that are desperate and out of options, but rather, companies that are successful and growing and simply need the assistance of the larger partner in order to do more.
Common M&A Problems
Sending out mass mailings that preach this message again and again simply dulls the audience and destroys credibility. The real challenge is to have a viable strategy that constantly refreshes an audience of technology builders who might have an interest in acquiring technology and companies as well as a constant stream of successful companies that might have an interest in partnering. Nat Burgess & Co. was founded to solve these two problems. Our results so far indicate that we’re on to something good.
Our first-ever client mailing went to 50 companies and we had a bounce rate of less than 5%. Our research shows that corporate development people turn over at an average 30% annually, and the turnover rate in other areas is higher still. Relying on commercial databases would have yielded a 30-50% bounce rate. The real work happens on the phone, but the phone call can’t happen until there is an initial point of contact and engagement.
A Different Approach
More importantly than our low bounce rate, we were able to address those that did bounce within 24 hours, leading to a 100% contact rate with appropriate contacts at buying companies within 48 hours of going to market. So, the first part of the problem—reaching a constantly refreshing, dynamic group of buyers—has been solved in the only way that it can be solved: through the careful attention of well-trained analysts who constantly refresh our buyer data.
The second part of the problem on the client side really comes from reputation and referrals. All our clients currently come through connections in the industry who have been carefully vetted and kept apprised of our target profile. We are not getting inquiries from the distressed situations or the ticking time-bombs; those companies need a different kind of service from the one we provide.
That’s not our model.
Instead, we have received a steady referral flow of ambitious, entrepreneurial companies that have the potential to grow even faster with the help of larger partners. And we couldn’t be more excited to work with them.