The innovative technology market is flush with M&A activity. This action will continue to accelerate as 2015 progresses with corporate buyers making strategic acquisitions to drive future growth. Many major technology companies, venture capitalists, and private equity firms have cash available and feel the pressure from shareholders and investors to leverage those assets to meet their investment objectives.
Middle-Market tech execs looking to better their chances for being swept up in the investment and acquisition activity can do a few things to stack the deck in their favor. Primarily, these business leaders must position their companies for sustainable growth and profitability – not just short-term liquidity. Long-term sustainable success inevitably makes a company look more desirable.
A few key aspects of a tech organization go a long way towards sweetening the pot and positioning the business for investment or acquisition:
BUILD A TOP-NOTCH MANAGEMENT TEAM
Building a scalable business often comes down to attracting and retaining top professionals in management positions. An experienced leadership team can readily identify market opportunities, handle competition and drive expansion of the business. They will also be focused on long-term success and handling the challenges associated with business growth. Companies receiving top M&A valuations are generally well-managed and generating profits – all qualities produced by an excellent management team.
DEVELOP STRONG INTERNAL CONTROLS
When it comes to an outside entity looking in at a business, investors will be evaluating the worthiness of a potential acquisition or investment by assessing key internal controls. The integrity of the business’s data and financial information, security of its information systems, level of compliance with relevant regulatory & legal requirements and accuracy of financial reporting are all under scrutiny during any evaluation process. By developing a strong foundation built on rigorous internal controls and processes, mid-market technology firms create an environment where the focus can be channeled to customer acquisition and revenue growth – all key qualities investors will be seeking.
Being recognized as the most valuable acquisition target is not always about offering the most cutting-edge technology or being the most broadly recognized brand in the market. Thinking about it from the investor’s standpoint, it could come down to addressing a specific need in the market or owning a strategic niche in the tech landscape. Think back to the previous two points: Outside investors will be specifically attracted to those businesses positioned for long-term success with the internal processes in place to support the demand paired with growth.
The above qualities are relevant for any business in any sector – regardless of intent to sell or attract outside investors. Developing a top-notch management team, mastering internal processes and differentiating your business from the competition drives growth and fosters a spirit of excellence within your business. This does more to open the door for future investment opportunities than focusing on temporary gains. Commit to a plan for long-term sustainable success of your business – not short-term growth. It will position you and your brand for the right investment opportunities in the future and prove to be far more satisfying until that day arrives.
For more on the sell-side process, explore our FAQs. Interested in evaluating your business’s worth in the current market? Our Economic Reality Analysis (ERA)© offers a realistic look at your strategic and financial valuations.