The sale of a technology company is subject to very specific rules. In the current context of rapid digitalisation of all sectors of the economy, AURIS Finance, a mergers and acquisitions consultancy, shares its recommendations with you.
Technology companies have never been so highly valued. This is reflected in the number of French unicorns (companies valued at more than a billion dollars). There are now 26, up from just one (BlaBlaCar). This boom in technology companies is linked to two phenomena. First, the digitisation of services in response to strong consumer demand, particularly in a post-pandemic era. Second, the large amounts of cash coming in from technology giants – Big Tech – and private equity funds.
The greed of Big Tech
Against this backdrop, it is not uncommon for the sales of technology companies to reach record highs. At the end of 2018, for example, Apple bought the British app Shazam for $400 million. In 2021 alone, the number of acquisitions made by Alphabet (Google), Microsoft, and Amazon exceeded all those made in previous years. What are these tech behemoths looking for in smaller companies? They are typically seeking to buy unique technology that can be integrated into their services, as Apple did with Shazam.
Prepare your M&A strategy well in advance
If you run a technology company, you should be aware that your innovations may be the subject of keen interest from large corporations, investment funds, and competitors in the sector. However, with the number of technology companies growing rapidly, competition between players in the sector is fierce. To stack the odds in your favour, you need to prepare your sale strategy well in advance. This means positioning your company well in its market. In particular, it means taking a structured approach to technology, such as making your offering Android and iOS compatible.
Make sure your data is beyond reproach
The barriers to starting a technology business are increasingly high. Regulation and respect for personal data are highly strategic factors. It is therefore essential to consider all the legal aspects of your business before any transfer operation. Just as your financial statements must be impeccable, the intellectual property of the technology you have developed must never be called into question. The buyer must be able to consider taking over your business with peace of mind and without any disputes.
Don’t underestimate the importance of the human factor
Companies may be technological organisations, but they are also social organisations made up of men and women. Certain employees are often crucial to the way a company operates, because they hold the key to the group’s culture or are at the origin of a formative innovation. Identifying and developing the loyalty of these key people will enable you to negotiate calmly with a buyer. Whether it’s a fund or a competitor, the buyer will want to be sure that these strategic employees will remain with the company after the sale. Remember that in very small businesses, the key person is often the director. Ask yourself under what conditions and for how long you are prepared to continue your activity before entering into negotiations.
Get the support you need
Beyond these general guidelines, each technology company faces its own specific issues. The experts at AURIS Finance, who are specialised in each sector, are aware of these issues and can assist you. They will be able to advise you from the search for a buyer to the completion of the transaction.
