High Tech Entrepreneurs' Forum

Successful Mergers & Acquisitions

Thank you to our sponsors at:

Fenwick & West LLP, 801 California Street in Mountain View

FountainBlue's June 11 High Tech Entrepreneurs' Forum was on the topic of Successful Exits through Acquisition.

Building your business and exiting through acquisition remains the most viable option for most entrepreneurs. Buyers have cash to deploy. Sellers have companies to sell. But what does it take to create a successful transaction both at the table and beyond?

From our previous M&A sessions, we know that it's about the people, it's about maintaining relationships, it's about being strategic, and thorough. We also know that it involves a lot of hard work, and surrounding yourselves with competent, experienced advisers makes a great difference in whether an M&A activity succeeds.

Our June 11 event will focus on successful exits through acquisition for high tech entrepreneurs, and will feature a panel of people intimately involved in the exit process. We’ll not only discuss typical exits through acquisition, but broaden your perspective by discussing some of the more complex deals including a reverse merger and acquisition followed by an IPO. Our esteemed panel

provided advice and guidance for high tech entrepreneurs considering an M&A event as an exit strategy.

• Understand your core business and value-add
• Understand why/if an acquisition would be a good exit strategy
• If you'd like to choose acquisition as an exit path, identify and track potential buyers long before you're ready to consider being acquired.
• Understand the buyer's perspective - why would they like to buy you - for the product? team? market? IP? customers? etc.,
• Consider how you may want to complement with potential buyers' products, markets, etc.,
• Be especially careful about joint IP creation as it may impact your ability to be acquired.
• When going through due diligence process, ensure critical players are engaged (rather than investigating other opportunities)
• When looking at potential M&A event, consider what will happen after the event - how your team and technology will be integrated, how it will fit into the vision of acquiring firm, buy-in at the different levels of acquiring firm, etc.,
• Be transparent, clear and proactive when there are issues to be revealed (as a lawsuit for example). Take the opportunity to clearly and proactively communicate and position the risk and implications of these issues.

• Understand your core business, where you're currently making money, and where you can add value in the long term (which may not be the same thing)
• Study the gap between the company's core skill-set and where you'd like to be and strategize on how to bridge the gap.
• If acquisition is one of the strategies to investigate, determine why acquisition is a good option (for IP? who customers? for market? etc.,) and which types of companies would meet those requirements.
• Partner with these potential companies on small, manageable projects to investigate synergies, determine fit, build relationships, create results.
• When there are gaps in your technology portfolio, invite sales reps to partner with other technology providers to fill those gaps. Ask sales reps who they have successfully partnered with and consider them potential acquiree candidates.
• As you go into the due diligence process, have a diverse team work with sellers to investigate all aspects of company, from IP to HR to product/engineering, team, sales, finance, etc.,
• Work with a lawyer to shepherd the process through
• As you go through the M&A process, never forget why you're doing the deal, how it fits into the company's strategic long-term direction.
• Ensure a cultural fit as incentives/rewards can't override the process/people and other  problems you'll have if there isn't a cultural fit.
• In performing diligence, confirm the perceived value is the actual value.

• There is a lot of capital out there, and a wave of acquisitions on the horizon, across all industries. There will be many more private equity deals than IPOs.
• Companies may be investing in licensing revenues, companies that can help bring in revenues, perhaps for different products, for different markets