Tech M&A: Preparing Your Tech Business for Sale

Tech M&A: Preparing Your Tech Business for Sale from Grant Thornton LLP

Many tech companies haven’t fully prepared for an acquisition. When the time comes, are you ready? Grant Thornton LLP shares the six best due diligence practices.

Published in: Business

Transcript

• 1. Tech M&A Preparing your tech business for sale grantthornton.com/duediligence
• 2. CONGRATULATIONS! You have an offer You've attracted a possible buyer: 2 But what's next?
• 3. The due diligence process The acquirer will now look closely at your company: • Financials • Operations • Systems • Performance 3
• 4. Issues can lower the price Multiple issues can suggest more systemic problems, leading to a drastically lower price or, in extreme cases, deal cancellation. 4
• 5. Preparation is key Find out what you need to know now — it's time to take action. Next up, the 6 critical areas of focus in preparing for acquirer due diligence. 5 Want to get the big picture? Read the full article>
• 6. #1: Financial due diligence How robust are your financials? Key areas to consider: • Working capital trends • Receivables • Active clients 6 • Sources of value • Financial systems • Accounting methods/policies TIP: Base your analysis on billings data to show the tie to financials; properly account for credit memos.
• 7. #2: Tax due diligence Key areas to consider:  U.S. and foreign income taxes  State and local taxes/Sales tax  Unclaimed R&D tax credits  Accumulated NOLs for federal income tax  Corporate structure and change-in-control agreements 7 How complete and current are your tax records? TIP: Prepare detailed records over a range of years.
• 8. #3: IT due diligence Are your IT infrastructure and systems a potential integration obstacle — or even a business risk? Key areas to consider: • Network architecture • Use of cloud services • Information flows • Capacity 8 TIP: Proactively flag any platforms, functions or strategies that may pose challenges. Read more>
• 9. #4:Operational due diligence Can your company deliver the expected market value post-acquisition? Key areas to consider: • Software/intellectual property • Confidentiality policies • Key employees 9 • Documentation • Software release calendar • Mix of direct sales/resellers TIP: Be prepared to share details on product development, launches and coding.
• 10. #5: HR due diligence Will the buyer be able to retain key employees and their client relationships and institutional knowledge? Key areas to consider: • Effective communication • Proactive outreach • Recruiting • Compensation packages 10 TIP: Identify and communicate with key employees.
• 11. #6: Cultural due diligence Are values and culture a good fit? Key areas to consider: • Communication • Transparency • Inclusion 11 Download the presentation> TIP: Identify the key cultural attributes of the acquirer and seller to highlight commonalities and resolve differences.
• 12. Be proactive Every facet of your company’s operations – the underlying financials as well as individual functions, systems and performance – will be under the magnifying glass. Start preparing now. 12
• 13. Marc Chiang Partner Transaction Advisory Services Grant Thornton LLP 415.318.2206 marc.chiang@us.gt.com Steven Perkins Managing Director Technology Industry Practice Grant Thornton LLP 703.637.2830 steven.perkins@us.gt.com InformationContacts 13 Ready to start your own pre- deal due diligence review? Contact Steve or Marc today.