Selling a High Tech Business
Posted by Chris on February 1st, 2010The original and still the most important purpose of the M&A Rainmaker blog was to impart the lessons that I learned in selling businesses, particularly High Tech businesses.
The process is discussed here
http://mandarainmaker.co.uk/wordpress/selling-your-business-2/
in some detail.
I use the sale of 2 of my businesses Voyager Networks and 5i as particular examples in the selling your business process. One of the reasons for this is that one, Voyager Networks, was sold at the height of the High Tech, Dot Com Boom in 1999/2000 and the other, 5i, was sold in the depth’s of the global economic recession in 2008/9. Yet they both sold and sold well.
A very similar process was used in both cases although there were differences other than the economic backdrop.
When we started Voyager we had no clear strategy for it being a lifestyle business or an exit route business. It only became an exit route business after my meeting with Investec and after innumerable approaches to buy us. This was something like 1996, 3 years into the life of the business.
5i, on the other hand, was started with the clear intention of exiting ( sale or float ) 3-5 years later.
In fact both businesses sold around 7 years after thier start and in conversations with other people who have sold High Tech businesses this seems to be a typical lifetime for a business before it is sold.
In both cases we conducted a ” Beauty Parade ” to find the right M&A ( Mergers and Acquisitions ) partner. In the first case settling on Ernst & Young and in the second Norton Corporate Finance. ( Actually it was probably thier Rainmakers and thier teams that we settled on aswell as the companies ).
I remember that in the case of Voyager we discussed who was going to sell the company ( after we had decided to sell ) and put into the pot Deloitte & Touche, Ernst & Young and one other ( who I forget ). To get to the short list the three partners each put out feelers amongst thier contacts and 3 were chosen for presentations. Our accountants and our lawyers were consulted ( D & T were our accountants ). We ended up using Ernst and Young and our lawyers ( from Leeds ).
With 5i the lawyers and accountants were consulted; board members and shareholders put forward suggestions and a process was followed which resulted in Nortons Corporate Finance being selected.
I have to say that in my opinion both firms were exactly the right ones for us. The Nortons process and culture was similar to the one at Ernst & Young and this was a factor in the decision to go for Nortons.
Now, there are a great number of Corporate Finance and M & A companies to choose from and it is very important to find the right partner with the right processes and capabilities.
It is possible that the right people to use are your own accountants and lawyers but probably not. Or, at the very least, you should look for alternatives. If you are very experienced at selling companies then you may well have lawyers and accountants that you have used on a number of occassions. My advice is directed at people who have not had these opportunities.
In an ideal world you want to have decided wether you are a lifestyle business or an exit route business as early as possible. Also in an ideal world, you want to give yourself time to select the right legal and accountancy M&A partners for you and your business.
M&A Transactions require one in 2010.
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