With over three decades of experience in the tech banking industry, businessman Paul Inouye offers insight on how to best prepare for a successful m&a transaction. His recent conversation provided insights into what processes software and SAAS businesses adhere to in order to best ensure a smooth and successful m&a sale.
“SaaS companies and software businesses have increasingly become targets for both strategic and financial buyers who are paying a premium for high growth businesses.” Paul Inouye says, “For software startup owners, this is an exciting and stressful process. Preparing for a merger helps the process be a smooth success. In many cases, it is important to have a mentality of slowing down to hurry up.”
Paul Inouye says there are several things to consider as a SaaS or software business preparing for a sale or merger.
Hire an Experienced Advisor: It is critical to work with an advisor who has domain knowledge of the tech software industry. That advisor will be involved in the thousand decisions that happen between kickoff and close and needs to be a trusted and experienced veteran. He will also need insight into the strategic and financial buyers that will assist in knowing how best to position your business to them.
Get Your Things in Order: A merger is already complex but can be messier if you aren’t fully prepared. While it might go without saying, Inouye says it’s essential to have clean well-documented financials, upcoming projected numbers well-vetted, and sales pipeline and visibility well organized. Customer contracts and legal proceedings must also be well in order.
Make Sure Your Key Constituents are Aligned: Paul Inouye explains that It is essential that key shareholders and board members are aligned as to the process, its goals, and its expectations. You also want to ensure that the appropriate senior executive team is informed and incentivized to assist in the transaction. Lastly, it is important that the key shareholders are kept in the loop regarding the potential transaction and appropriate involvement.
Assess Alignment of M&A Market and Business Momentum: For a successful merger, it is ideal that you launch a process both into a strong M&A market and that your own business is performing well and showing robust growth. Companies are valued at forwarding development so having strong business visibility that is both defensible and well-articulated is hugely important.
Be Positive and Proactive in Positioning the Business: “As the company leader, your approach towards the merger will rub off on everyone else involved,” warns Inouye. “It is also important to take a hands-on approach to the process including being highly involved in its positioning, articulating its value proposition, its competitive advantages and its key business highlights and in working closely with your advisor.”
Paul Inouye has worked for over 30 years in west coast technology banking. He has strong domain knowledge, deep insights into strategic and financial buyers, well-honed negotiating skills, and extensive knowledge of the M&A process. My focus over my career has been in M&A transactions for both software and internet tech businesses, and, like many of my clients, I am an entrepreneur myself in running my own M&A boutique. I understand how hard it is to grow a business successfully, so I am very motivated to ensure that I get successful outcomes for my clients, who have spent many years working hard to build great businesses.