Entrepreneurship is looking ahead. Even in these strange and uncertain times that we are in the middle of right now, it is therefore important to look at the period after the corona crisis. je Sell tech company may now be low on your priority list; understandable! Yet now is the time to continue to think about this. The corona crisis will pass, but not without impact on our economy and on our lives. In our collective memory we will always carry this crisis with us.
The entire crisis also offers valuable insights and opportunities. Take Tech companies that are thriving right now or the quarantine situation that underlines the importance of technology. Working from home, which the whole of the Netherlands is now forced to do, has made it very clear that the continuity of almost every company would not have been possible without technology.
Technology is more important than ever in this day and age
If we had had this crisis before the internet and mobile telephony era, our world would have become really small. The economic impact would also have been many times greater. Tech companies are more important than ever these days, and thanks to all the facilities, there are fortunately many industries that can continue to operate despite the crisis.
Tech companies are less affected if they focus on core business processes
There is now more urgency than ever to take action in the digital transformation battle. Tech companies that focus on core business processes will therefore also be less affected by this crisis. These companies have a sticky business model, as we call it. Tech companies that currently focus on healthcare, e-commerce, online payment traffic and logistics processes are even seeing their turnover increase. Take the Dutch CM.com in today Sprout even announced that it foresees 30% growth in 2020.
This expectation is also confirmed by the price development of Tech companies. For example, if we look at Microsoft and Salesforce, then we see in all cases that the price has fallen, but is again rising to the level of November 2019 (and a cautious trend upwards).
A company like Slack Technologies Inc, which focuses entirely on being able to collaborate digitally, is even showing a higher price compared to six months ago.
Investors, Venture Capital, Private Equity and Strategic Parties are all looking for companies that have the 'success cards', be sticky, generate recurring revenue and continue to exist even in difficult times. And at best, these companies provide necessary and business-critical technology.
Technology will always be at the center of this new reality
From No Monkey Business we see that our sales processes are going through in the middle of the corona crisis. Many of our customers use this time to work towards a successful exit. With good preparation, a Tech company can value at an exit increase significantly! But even after the crisis, these Tech companies will continue to be popular with buyers. A recent survey (March 2020, in the midst of the crisis) by DealSuite among M&A professionals provides interesting insights that underpin this trend. Below is a top 5 of the most important expectations of these professionals, which are important for the sale of a Tech company:
- Shifting focus from the importance of transaction structure to added value.
- Interpretation of the effects of the virus outbreak leads to more strategic M&D (merger and acquisition) consultancy work.
- Decrease in F&O activity offers opportunities to intern processes (and online presence) to improve.
- Increase of interest in (tech) companies that facilitate remote working.
- Companies are going to adjust their strategy; this can lead to new and different purchase intentions.
It is also striking in this research that most M&A offices do not have to deal with aborted sales processes. The M&A processes are all ongoing at the majority (more than 80%) of the offices.
Start increasing the sales value of your company right now
Many Tech Entrepreneurs Thinking of the selling their business are afraid that the valuation of their company will decline during this time. At the moment we see no reason to do so. First of all, you can start by normalizing any disappointing results. After all, this is a unique time and it is therefore not surprising to stick to previously achieved results. But, there are even more opportunities!
As a Tech company, you should invest in optimizing and improving your company right now. In this “lock-down” phase there is time to re-evaluate your strategy. Take a good look at where your company has or has not been affected. Also research how other colleagues are dealing with the current crisis and take advantage of this. Has your trade fallen? Then think about how you can prevent this in the future by, for example, broadening your customer and/or product portfolio. Are there opportunities right now? Great, then think about scalability and how you can offer your product or service even more easily. But also start working on the next phase, such as by fine-tuning your business plan for the next 36 months and clearly defining your goals. Just like building your business, selling your business takes time. Too often we see entrepreneurs put up a sales sign in the garden from one day to the next. That's a missed opportunity. With some extra preparation, you can significantly increase business value. It's up to you how much time you spend on it. Our advice is to pack between 8 and 16 months.
To create added value you could start with our NMB approach – 16 factors that have a major influence on your business value. In this way you can lay a foundation for the sequel.
Finally; keep faith!
The corona virus will pass, but we will never forget this period. This time will also go down in history as a defining period that will hopefully allow humanity to make different choices that are better for us, and for the world.
Don't always get in the car for every meeting. Why all go to the office at the same time? We have now proven that we can also work from home very well. But also be more critical of the need to fly, both for business meetings and private.
Technology will always be central to this new reality. So there are opportunities right now for Tech companies that want to take the next step in their growth strategy, or are considering an exit.
It has never been so clear that the Tech sector is indispensable and therefore top of mind for many buyers and investors.