04 Jan How to Choose the Right Buyer for Your Tech Business
While other sectors saw significant declines during the COVID-19 pandemic, much of the tech sector continued to thrive, especially in industries that supported remote work, telehealth, and an improved supply chain. If you’re considering selling your business, you might be looking at a valuation that has increased since the beginning of the pandemic, especially if you’ve remained flexible and provided vital services. That doesn’t mean you should sell to the first buyer who comes along. Exit planning for your tech company requires you to think about the right buyer profile, so you can begin marketing to that buyer. Good marketing is the key to good M&A.
Why the right buyer matters
Choosing the right buyer is important for the long-term health of your business. If someone who lacks the qualifications to purchase your company invests, you may soon see your company and hard work fall apart, as your staff lose their jobs and their economic security. Or if you sell to the wrong PE company, you could see your business grown into something profitable but unrecognizable. In some cases, you’ll never even get to the sale process because prospective buyers aren’t serious. They might be competitors hoping for trade secrets, window shoppers who back out at the last minute, and other people who waste your time and effort without shelling out the cash to compensate your work.
The right buyer is well-qualified to run your specific company. And because they’re interested in your business, they’re more likely to pay a fair price, to run your company well, and to protect your hard-earned reputation after you’re gone
Who is a good buyer?
There’s no such thing as a universally good buyer. The right buyer for your friend’s company could be an absolute nightmare for your own. So know that finding the right buyer begins with identifying the unique facets of running your company, then considering what type of buyer will be best equipped to continue managing these aspects of the business.
In general, a good buyer:
- Can get financing to run your business.
- Has expertise necessary in your sector.
- Has experience running a business like yours.
- Values your business as more than the sum of its parts.
- Will treat your people well.
- Has a plan to grow your business and increase its brand recognition and profitability.
- Has a track record of successfully buying and/or merging businesses.
Keys to choosing the right tech M&A buyer
One of the best things you can do to find the right tech M&A buyer is hire a quality business broker or M&A firm. The right advisory team has deep industry connections, and can begin pre-screening buyers even before putting your company on the market. Another important ingredient in the recipe for success is the right marketing. You need to identify the profile of your ideal buyer, and then market heavily to them. Then nurture a competitive bidding process to get the price as high as possible. With the right advisory team in place, you’ll get it right the first time, and won’t waste money courting an unqualified or fair weather buyer.