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Technology & CommunicationsM&A deals in the technology sector have fared well, mainly due to the fact that many strategic buyers have stepped forward in an attempt to create a mainly digital experience for users. This “digital convergence” (according to PricewaterhouseCoopers) has meant that acquisition activity is premised upon finding the most cost-effective, promising solutions to reaching “digital convergence.” Therefore, for our clients that we have been able to position as the solution to a buyer’s digital convergence strategy, valuations have been at a premium, often far above what the closest private equity group is willing to offer. Recent M&A TrendsThe lower middle-market (deals under $100 million) has weathered the credit freeze and "Great Recession" better than the upper middle market has. The deal landscape for the middle market has changed as Wall Street has struggled, but so far, deals are getting done.The biggest change has been in the deals has been valuations, reliance on debt and reliance on the seller to finance part of the deal. We have seen an increased use of earn-outs, which are typically used in periods where interest rates are high or credit is tight. Thus, PE groups have not stopped investing, and in fact are aggressively trying to deploy their capital into middle-market companies. As profits are returning, many strategic buyers are more willing to use their cash reserves to purchase various technologies or intangibles that are of synergistic value to them. Depending on your situation, now could be a good time to seek an exit or even plan for an exit several years down the road. For those that want top dollar for their company and know it will achieve strong, consistent growth for many years, now is definitely not the right time to sell. While valuations may be down, there are many creative ways of structuring deals that may not affect your end proceeds much. Therefore, if you are a business owner looking to sell, do not avoid doing so due to market conditions. While current market conditions might require a more nuanced approach, the directors at Orion Capital Group have the experience to help you weather these current changes. If you would like to learn more about Orion Capital Group, please contact us by your prefered means. Any mode of communication is held strictly confidential. |
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