Like Goldilocks and her quest for the perfect bowl of porridge, the mythical “perfect fit” isn’t possible, but finding the “right fit” is very necessary.
The “right fit” is a deeply personal definition.
It’s specific to the cultures of your tech firm and the one you’re searching for. It’s specific to the people who live and work inside both of these excellent firms. But it isn’t just that, It is also about customer care, your core values, and philosophy of business.
It’s a thorough examination of your two firms to determine the readiness for an acquisition, including a Calculation of Value and a close examination of the specific risks of doing a transaction.
We will make sure your transaction is successful because we prepare you with a comprehensive set of recommendations that mitigate risks, from letter-of-intent (LOI) to post-merger planning.
I can’t find the “right fit” to acquire.
Finding (and buying) a company to acquire should never be a seat-of-the-pants adventure.
It needs to be treated as a business process and transaction.
- It’s one part culture fit.
- It’s one part financial fit.
- It’s one part product and services fit.
- It’s one part geography fit.
- It’s one part technology fit.
- The “right fit” is aligning all these.
It’s about all these adjacencies aligning with your current business offerings, service lines, software stack, and delivery/operational deliveries. The right fit for your acquisitions should increase shareholder value, diversify your services, expand your geographic footprint, and improve your EBITDA/profitability.
In order to find the best fit, you need to identify and document your strengths as an organization such as management, customer insight, and cultural orientation, market nuances, and even your liabilities.
Having the “right” legal and accounting team is fundamentally critical to finding the best company to acquire, so you’re not floundering to try to find some mythical unicorn that doesn’t exist.
Due diligence investigation your seller will undertake.
Before committing to the transaction, we’ll learn from your seller about the financial obligations you’d be assuming, the nature and extent of the selling company’s liabilities, contracts/agreements, risk and intellectual property issues.
Your seller will need to ensure that its books, records, and contracts can stand up to a robust due diligence process. Here are some issues that can arise, that we’ll find in the due diligence process:
- Contracts signed (and unsigned) by both parties
- Signed/unsigned employee-related documents, such as stock option agreements, confidentiality agreements, intellectual property agreements, etc.
- Deficiencies with these documents and agreement, including tax components, seller’s financial statements, and revenue projections
- Historical financial statements and related financial metrics, as well as the company’s projections of its future performance.
- Annual, quarterly, and monthly financial statements
- Have the financial statements audited, and, if so, for how long?
- Profit margins for the business and trends of growth, or a deterioration
- Have EBITDA and any adjustments been properly calculated? (This is particularly important if the buyer is obtaining debt financing.)
We’ll work with you to ensure the “right fit” meets your criteria of a good buy.
Great M&A lawyer and accountant.
It is critically important for a successful M&A process that the selling company hire outside counsel that specializes in mergers and acquisitions for the tech market.
The outside legal team should include seasoned M&A attorneys but also experts in appropriate specialty areas like tax, compensation and benefits, employee matters, real estate, intellectual property, etc.
M&A transactions have a lot of moving parts that are typically fast-moving and contentious. It’s the M&A lawyers role to be intimately familiar with both the business realities of M&A deals of the technology industry, as well as the structure and inner workings of the acquisition agreement. They must have complete command of the applicable law and must be a skilled advisor, negotiator, and draftsperson.
The same holds true for the accountant involved in your transaction. The best tax advisers should be focused on saving you dollars and cents, as well as putting you in the position to structure a deal that makes the most tax sense for your future.
The wisdom you’ll receive from a great tax adviser will help the overall finances be the most efficient, as well as offer you cost savings.
We don’t want you to stumble upon your ideal seller, we want you to subscribe to a proven process that determines your value in finding the “right fit” in your search for a great buyer.
At iT Valuations, we help firms like yours determine value when it matters most, so you can find the best tech firm to partner with through acquisition. Click here to get started.