Presentation Mistakes that Will Cost You a Buyer

September 2019 Tech M&A Monthly - Introduction

Tim Goddard

Hello, everyone and welcome to Corum's Tech M&A Monthly for September 2019. I'm Tim Goddard, EVP of Corporate Strategies here at Corum Group. I'm taking on a new challenge after running our marketing department here for a number of years. I'm looking forward to working with many of you in the months and weeks ahead.

But before that, we've got a packed agenda. First, to a deal announcement with Martin Lowrie , followed by a field report with Jim Perkins. Then we'll go to our monthly Tech M&A report with the Corum research team. And then finally, we'll finish up with a special report, the top mistakes during buyer presentations.

And before we get into any of that, I just want to say we just got back from our trip to Langara in the Gulf of Alaska where we treated recently clients who successfully sold their companies to a weekend of fishing for salmon, halibut, and more. The weather was amazing, the fishing was great, and the company was excellent and I hope that you can join us next year.

Now let's go over to Martin Lowrie in Boston for a deal report. Martin?

 

Deal Announcement: Blue Cow Software Acquisition

Martin Lowrie

Thanks, Tim. I recently led the engagement with Blue Cow Software that was acquired by a strategic acquirer. I first met Mark Norden, the CEO at Blue Cow, at a selling up selling out conference and Mark really took to heart the advice that we gave him to make sure that he boosted his valuation when we took the company up to market. That really became obvious when we went to market and found all of these buyers that were extremely interested in the company. We ended up selling the company in four months, which is really almost unheard of in the industry, which I think shows how attractive Blue Cow was in the marketplace.

So, I just want to take a moment to congratulate Mark and the team at Blue Cow Software for a great acquisition and being such an easy client to work with. Thanks, Mark. And Tim, back to you.

Tim Goddard

Excellent. Thanks, Martin and congratulations to you and the team of Blue Cow for setting a new record for closing, only one month after going to market. Nice work.

 

September 2019 Market Spotlight: Esports

Tim Goddard

Next, we'll go to Jim Perkins in Phoenix. Jim, what's the word from the field?

Jim Perkins

Thanks, Tim. Esports or competitive gaming is the next major source of entertainment media. Its popularity has skyrocketed so much in recent years that a 16-year old boy from Pennsylvania recently won $3 million playing in the Fortnite World Cup, entertaining and inspiring millions of people across the world. The Esports market spotlight airs September 26 so be sure to visit wfs.com. That's wfs.com to check it out.

Tim Goddard

Thanks, Jim. I'm looking forward to that spotlight.

 

September 2019 Tech M&A Report: Public Markets and Corum Index

Tim Goddard

Now let's go to Elon Gasper and the Corum research team for our Monthly Tech M&A report. Elon?

Elon Gasper

Thanks. We'll begin with the public markets where US tech heavy indices retreated in August with the S&P Tech and Nasdaq each down 3%. Other markets fell as well, particularly in Hong Kong and London with concerns about trade, economic, and political uncertainties.

Tech M&A was quite active as our Corum index showed an increase in transaction volume to the highest in over three years along with the most megadeals and the most PE platform deals in over a year. Our pipeline metrics captured a rise in smart money, VC exits, plus in attributes. The percentage of startup exits rose notably above its normal summer range. These all matches with our perception at Corum of urgency to take advantage of this seller's market while the window of opportunity remains open.

 

September 2019 Tech M&A Report: Megadeals Trend

Elon Gasper

Among August megadeals, a global management consulting firm, Navigant was acquired for $1.1 billion by Guidehouse, formerly PWC's US public sector business to add commercial perspective to its supportive clients complex regtech systems needs.

August mini infrastructure megadeals include cloud monitoring startup SignalFx bought for more than a billion by analytics vendors, Splunk, in its largest ever acquisition, while VMware spent over $5 billion last month to wrap up Pivotal, a cloud application developer, and cybersecurity firm Carbon Black, bringing VMware to eight deals already this year.

How did the rest of infrastructure fair, Julian?

 

September 2019 Tech M&A Report: Security and Network Management

Julian Valencia

Both sales and EBITDA multiples remain steady as security deals led the sector where the enterprise security assets of Symantec were bought for almost $11 billion by Broadcom in a renewed push into enterprise software. In cloud security, Israeli firm SkyFormation was picked up by same solutions provider Exabeam getting access to the important security talent pool there. And multi-cloud application and security platform, NanoSec, was pocketed by cybersecurity giant, McAfee, to strengthen its container security capabilities. The quiet data storage subsector was stirred by two major players as Google snapped up enterprise file and storage provider, Elastifile, to bolster the storage capabilities of its cloud platform. And Amazon budged in acquiring enterprise flash storage startup, E8 Storage for AWS.

From the authentication space, BlueTalon, a vendor of data access control solutions, was purchased by Microsoft to extend its big data security expertise. Microsoft will be joining us as a panelist at the WFS Conference in San Francisco next week.

Trustelem, a Paris -based cloud access management startup, was acquired by cybersecurity company, WALLIX, to enhance its identity and access management offerings. The Spanish digital identity firm, Redtrust, was grabbed by ID management specialists, Keyfactor, to accelerate the Cleveland-based firm's expansion in Europe. And here in Seattle, digital identity platform developer, Trusted Key, was bought by HR SaaS giant, Workday, as it plans to move workplace credentials onto a blockchain network.

In the network management subsector, Uhana, a developer of AI-based engines for mobile networks optimization was snagged by VMware. This deal marks VWware's third acquisition in the AI and machine learning tech space. Network analytics company, Entuity, was acquired by data center hardware maintenance company, Park Place Technologies.

What's been going on in horizontals, Stephanie?

 

September 2019 Tech M&A Report: Horizontal and Human Resources Technology

Stephanie Jensen

Horizontal sales multiples fell back from the record-high they set near the end of Q2 as demand focused on profitable models holding EBITDA-based metrics steady. Just days after closing at $16 billion acquisition of analytics from Tableau, Salesforce reached in another direction, spending $1.4 billion for field service management firm ClickSoftware. OpenConnect, a workforce in process management analytics firm headquartered in Texas, was picked up by UK digital operations manager, ActiveOps.

We saw a flurry of deals in the HR subsector. In London, FMP Global, a payroll and HR solutions provider to SMEs, was purchased by IRIS Software in its third acquisition this year. Payroll SaaS provider, Paytime, was bought by financial services providers, CBIZ, which seeks to strengthen its HCM offerings. And in Madrid, cloud HR solutions developer, Meta4, was wrapped up by French enterprise software veterans, Cegid, to help it expand into Spain, Portugal, and Latin America.

In the recruiting arena, ClickIQ, a UK-based analytics platform for monitoring recruitment advertising spend was grabbed by job website, Indeed, for its AI-based recruitment technology. And programmatic job advertising firm, Appcast, was acquired for almost $80 million by Axel Springer's job portal, StepStone, further expanding its job classifieds portfolio.

 

September 2019 Tech M&A Report: Payments, Analytics & SCM Technology

Stephanie Jensen

Strong deal flow in payment processing continued globally with a megadeal as select real-time payment assets of Denmark's Nets Group, were acquired for $3.2 billion by Mastercard in its largest acquisition to-date. In South Africa, where we just held a Corum merge briefing, payment processor PayFast, was bought by DPO Group, a Kenya-based payment services provider seeking to expand its geographic footprint. And Sri Lankan fintech pioneer, Interblocks, was acquired by Hitachi in a bid to accelerate the development of payment channel solutions in India and Southeast Asia.

In the business analytics subsector, advanced analytics firm, Lymbyc Solutions, was purchased for $5.6 million in 5.4 times revenue by IT services firm, LTI, to enhance its natural language processing and data visualization capabilities with Lymbyc's sub-virtual analysis technology. Montreal-based IoT analytics company, Mnubo, was acquired for $78 million by asset optimization software developer, Aspen Technology.

Stephanie Jensen

In SCM, product data solution provider, 1WorldSync, was bought by Battery Ventures as a platform to which it quickly added a couple of products divested by LANSA.

Finally, in the Netherlands, supply chain software startup, Optimizers, was acquired by Main Capital.

Next, can you bring us up to date on the Internet market, Matt?

 

September 2019 Travel and Food Delivery Services Tech M&A Report

Matt Haberlach

Internet values as reflected a focus on profits with sales multiples steady, the EBIDTA metrics up almost 11%. Deal flow continued in Travel and Food Delivery services where Square's sold high-end delivery at Caviar, which it bought in 2014 for $90 million, for $410 million to DoorDash as it strives to compete with Uber Eats and Grubhub in the consolidating food delivery sector. Campus food delivery app, Good Uncle, was acquired by food service giant, Aramark, to expand its campus dining solutions. Texas-based Mr. Delivery was pocketed by delivery.com an online marketplace at restaurants and grocery stores that aims to broaden its national footprint.

Consolidation continue globally as well. Ukraine food delivery company, Eda.ua, was purchased by Armenian food delivery startup, Menu Group, to extend its presence in Europe. Finally, India food tech firm, Binge Digital, is picked up by restaurant e-booking platform, Dineout.

Travel subsector deal flow continued this summer as business travel marketplace, Urbandoor, is snapped up by Airbnb to enhance its corporate offering. Corporate tech travel AI specialists, Gallop.ai, was acquired by a Japanese travel agency, Amnet, in its second tech acquisition this year. Spectrum equities digital outdoors guide provider, AllTrails, rolled up two outdoor recreation platforms. Trails.com out of California and Germany website GPSies, to expand its global trails database.

 

September 2019 Internet M&A Deals for Home Services and Ecommerce

Matt Haberlach

M&A in on-demand home services continued with global services marketplace, Hireahelper.com, nabbed by Seattle home improvement platform, Porch, in it's second such purchase this year. And HelperChoice, a portal for migrant domestic workers in Hong Kong, was bought by Paris-based childcare platform, Yoopies, strengthening its presence in Asia.

In the e-commerce world, music gear marketplace, Reverb, was acquired for $275 million by Etsy as the original handmade good specialist expands into a new market vertical. And Google backed Indian startup, Shopsense Retail, was bought for nearly $43 million by conglomerate Reliance Industries, seeking to ease shops as fashion shopping platform to insert itself into the Indian ecommerce battle between Amazon and Walmart subsidiary, Flipkart. And blogging unicorn, Tumbler, once acquired for over a billion by Yahoo, was taken off a resident's hands for less than $3 million by Automattic, the owner of Wordpress.com.

Elon Gasper

Wow, timing is everything. Finally this month, just two weeks after its cloud monitoring megadeal. Splunk tucked in a related firm, Omnition, to move yet further into IT operations analytics, a good example of how megadeals will catalyze smaller M&A.

And that's our report on an unusually active August. We have lots of strategic disruption setting the scene now for follow-up acquisitions, while this window remains open. Back to you.

 

Special Report: 9 Presentation Mistakes That Will Cost You A Buyer

Tim Goddard

Thanks, Elon. Now, for our special report moderated by Steve Jones. Steve?

Steve Jones

Last month, we talked about the specifics of the executive summary is short, concise document, highlighting the value proposition of your company. Let's jump forward now a bit in the process -- you've honed your message, it's crafted, your engagement team has also identified the buyer list, and we've tailored those messages to those buyers.

Now comes the fun part, but the hard part as well. The next phase is presenting to interested buyers. Remember, this is a process. Every piece needs to be done right for a successful outcome. We've sold more software companies to anyone, so we've seen countless buyer presentations. This is the chance that management has to interact with a potential buyer. We see a number of critical mistakes that could stop a deal dead in its tracks. So, we thought we'd distill a short list, nine presentation mistakes that will cost you a buyer, presented by our gold team of our deal makers. Each of them, a former CEO who has been in your shoes, built and sold their own companies. I have some personal experiences on how to present to a buyer and make it effective.

First, we'll go to Dr. Ivan Ruzic out of the Middle Atlantic near Princeton. Ivan?

 

Buyer Presentation Mistake #1: Doing Your Highest-Value Presentations First

Dr. Ivan Ruzic

Number one, doing your highest-value presentations first. Now, it seems counterintuitive, but it's important to understand that this is a process. Pitching your company versus selling your product is very different. Being in front of a potential buyer is not the same as being in front of a customer or even an investor. Like anything, practice makes perfect. Going through your deck and talking points with advisors and key stakeholders will give you a major advantage.

But practicing with a real thing is even better. So, when scheduling your first management presentations, start with the less likely bias. These could be the rabbits, the buyers who respond quickly to every deal but usually at low valuations, or the so-called B-list buyers. Those who will need more time to understand your business anyway. So, starting early and giving them that extra time just makes sense. And starting with them also gives you practice. At the same time, don't underestimate the B-list buyers. We get 40% of our initial interest from them and sell them 25% of our companies. Even the rabbits are sometimes are wide acquirers. They're all important in the process.

 

Buyer Presentation Mistake #2: Including the Wrong Team Members

Steve Jones

Now, let's go to one of our newest deal makers, Ron Pullar out of Denver, Colorado.

Ron Pullar

Number two, including the wrong team members. Make sure that you have all the key players presenting with you, but only those key players. Central to this mistake is a failure to have rock solid communication and thus, alignment among your core team. Everyone needs to understand the key messages and be committed to the plan. You don't want anyone departing from the script as buyers will quickly pick up on any clues that suggest the team is not on the same page. This can absolutely kill a deal. By displaying a unified, cohesive team, you're sending a positive message about future performance of the business. A team will find success. A group of disconnected individuals, no matter how talented or experienced will fail.

Finally, this is a chance for buyers to get to know the leaders who will take the business forward. You've worked hard to bring a great team together. Give them the opportunity to shine.

Steve Jones

Thanks, Ron. I think your point relates to an even bigger theme that Joel Espelien, here in our corporate office in Seattle, can shed some light on. Joel?

 

Buyer Presentation Mistake #3: Inconsistent Messaging Between Channels

Joel Espelien

Number three, inconsistent messaging between channels. If you've avoided the previous mistake and made sure to involve your key people, this will be less of a problem. Your message needs to be the same across the board -- the executive summary, the presentation, all follow-up correspondence, and even your website need to be as tightly aligned as possible. Knowing your value, communicating it regularly, consistently, and supportively through all forms of interaction with the buyer will be a testament to your professionalism and your firm's capabilities. This is why, as we discussed last month, crafting a concise, clear executive summary that crystallizes the opportunity your company represents the buyers is so important. This document should serve as your map for all communications with the buyer moving forward. So, taking the appropriate time to fully develop your positioning, which can then be weaved through your executive summary, your presentations, and all communications is such a worthwhile investment. Be concise and consistent. Buyers will appreciate your clarity and thoughtfulness.

Steve Jones

Yeah, you're absolutely right, Joel. Rock solid communication and consistency is a must. Our next point comes from Mattias Borg in Zurich, Switzerland.

 

Buyer Presentation Mistake #4: Not Presenting the Most Crucial Material First

Mattias Borg

Number four, not presenting the most crucial material first. Think of it this way. The most important individual in the room, the key decision maker on the buyer side, may only be there for the first five minutes. Get to the point quickly, immediately providing a framework for your audience to understand the essence of your company. You find very quickly how your company's unique as a leader regarding technology, strategy, domain expertise, et cetera. Why are you uniquely positioned to capture markets? Get your audience's attention fast, and they will want to hear more.

At Corum, we often see this mistake with our clients during our preparation phase. A CEO will try to present bottom up versus top down, diving into details of technology, history, etc. Essentially, they start with how first. Start with why to draw a parallel. If you were promoting a race car company, your audience is less concerned with engineer behind the motor. How fast is the car?

Steve Jones

Thanks, Mattias. Now, we'll go to Allan Wilson in Austin, Texas.

 

Buyer Presentation Mistake #5: Overreaching

Allan Wilson

Number five, overreaching. Picking up from that previous point, you want to make bold claims and get your buyer's attention. Be confident in what you and your team have created and realize that your solution does have significant volume. You wouldn't be in front of the buyer if that weren't the case, but don't bet the farm on unrealistic claims or preach as though you were the only expert in the space. Nothing will kill your presentation as momentum faster. Essentially, aim for credible, not incredible. And even if you are on your game, watch out for buyers offering you an opportunity to make such a claim. Don't take the bait. Buyers will tempt you to overreach. And then doing so, will test your business skills.

Steve Jones

Allan, without question, that's a very easy trap to fall into. Thanks for your insight there. Now, back across the pond to Julius Telaranta in Berlin, Germany.

 

Buyer Presentation Mistake #6: Falling Flat on Passion

Julius Telaranta

Number six, falling flat on passion. Your delivery counts. Excitement for what is possible after the deal is done is highly infectious. Don't give the buyer the impression that you are bored with your business. You need to come across as having things at your fingertips and be confident in your answers to their questions. How well do you understand your customer's pain? How vital is your company to making them successful? Then open the door for them. Dream a bit on their end. Mapping out how you and your potential buyer will find success together will improve the deal value, showing that you have included your potential buyer in your plan post deal brings them in and allows them to share in that excitement.

And champion a bright future. What new markets become accessible following the deal? What new products are possible with the help of the right strategic or financial buyer? Do your homework. Does your solution fit into their portfolio? How will the combined solution take the market by storm?

Last, but certainly not least, don't forget your basics with presenting. We can all read. Never simply read from the PowerPoint. Expand on the points of each slide. Also, what's the four-letter words, the technical jargon, or English to slang? Use simple to understand technical descriptions and don't drown the buyer in a so much technology that their eyes glaze over.

Steve Jones

Great stuff. Thanks, Julius. All right, now back over, this way to Texas, here from Jeff Brown in Houston.

 

Buyer Presentation Mistake #7: Failing to Listen to Your Buyer

Jeff Brown

Number seven, failing to listen to your buyer. Buyer presentations are a two-way street. You'll have a rare opportunity to gain insight on what's most important to the buyers, what they perceive as your greatest value, and why. Unlike a discussion with members of your team who may be die-hard champions for the company, your buyers will provide critical feedback that you need from an entirely different vantage. Failing to keep an open mind and disregarding your potential buyer's feedback is at best, passing up on a major opportunity. At worst, you come off as arrogant and even condescending.

So, during your presentation, listen carefully and don't be afraid to depart from the script to dig deeper and tease out nuances that could have a profound impact on the discussion. If your buyer isn't interacting, then engage them with relevant questions. Conversation allows for a freer interchange. It could be more productive and enjoyable. This will help you present your company's value in the context of the buyer incorporating their feedback and their views into your message.

Steve Jones

Thanks, Jeff. Well done. Now we'll hear from Jim Perkins in Phoenix, Arizona.

 

Buyer Presentation Mistake #8: Not Preparing for the Tough Questions

Jim Perkins

Number eight, not preparing for the tough questions. Buyers will try to trip you up, so be ready. You will almost always be asked general questions about the proposed transaction. For example, why are you seeking an acquisition or a partner? What does your ideal partner look like? Why do you think we're that partner? Who are the key personnel and what are their attentions after the deal? What are you personally looking for?

You will also face specific questions about your strategy and vision, your products and technology, your sales and marketing efforts, your customer base, your competitors, your organization, and your people. This is another area where having a professional advisor and a sell-side team behind you is a game changer. Your advisor and support team should have a library of the most likely questions and discuss them beforehand. There is no such thing as being too prepared.

Steve Jones

And now for our final point, let's go to Jaber Tannay in Paris, France.

 

Buyer Presentation Mistake #9: Forgetting That You Are Always Selling

Jaber Tannay

Number nine, forgetting that you're always selling. The process of selling your company begins when the buyer reads the executive summary, describing your company and its value to them. The process ends when the definitive agreement is signed and money changes hands. In between those two points, you need to be on top of your game. When you talk with the prospective buyer, everything you say should reinforce the value that your company brings to them and how great it will be for everyone after the transaction is complete. A buyer is acquiring your company to fill a gap in their portfolio. They are buying your business to increase the value of their own business. Never stop selling and reinforcing in their minds the thought of how great it will be. Continue to reinforce the great decision everyone is making and how happy you are that they are considering an acquisition. Throughout the entire process, never be complacent and never make assumptions. Be on the lookout for the slightest glimmer of fear, uncertainty, or doubt in the buyer's mind and slam that door shut by reinforcing all the positive reasons why this will be a spectacular success.

Steve Jones

Excellent. That's amazing insight. Really appreciate everyone helping out. Like Jon Scott said last month, this is the biggest financial decision of your life. You can't afford to go out on your own. Just too many opportunities for mistakes to make along the way. Our whole goal is to get you in front of the buyer. You have the passion. You know your company. No one else can make the case like you can. That's our goal and we want to prepare you to be as effective as you can when that opportunity comes.

Tim Goddard

That's really great advice. Thanks to everyone who participated. That's it for this month's Tech M&A report. We'll see you next month for our Q3 overview plus a special report on the number one deal killer in Tech M&A. Now let's go to our close.