How to Extract the Most Value from Your Exit

15 May, 2015

Given today’s very active technology merger and acquisition market, which continues to look strong in 2015, it makes sense to proactively prepare to achieve the most value from your exit.

WP-TASOHMAV-smToo often, technology companies seeking a profitable exit make the flawed assumption that the due diligence and valuation process is driven solely by the buyer. This assumption can lead to fatal positioning and diligence mistakes, which undermine value, slow the evaluation process, or ultimately kill the deal. The truth is, as a selling team you have an enormous opportunity to shorten due diligence timelines and proactively repair those areas acquirers look to press their advantage, thus maximizing the value that the buyer assigns to your company.

Perhaps you’ve heard the saying that technology companies are generally bought, not sold. That’s true. The largest, most active buyers—companies like IBM, Google, Oracle, and Microsoft—are continually seeking out and evaluating emerging technology companies to expand their portfolios.

This has two important implications for the selling company:

First, you never know when a potential buyer will “knock on your door,” so your senior team should be prepared for a rapid, comprehensive due diligence process now.

Second, you need to understand the core aspects of the technology buyer’s key valuation criteria and then scrutinize your company from the buyer’s perspective, or from “outside in.”

Remember, during the due diligence process, time is not your friend; the longer the diligence process stretches out the higher the probability that concerns will arise, and purchase price adjustments will occur. Careful examination of your company from an external perspective and addressing potential buyers’ concerns in advance will not only increase the likelihood of receiving the price that was agreed to in the term sheet, but will also make the deal move faster and improve the chance of a successful outcome.

What will a potential acquirer look for when they approach your company? What will be the focus of their deep diligence?


  • Market Strength

    —Can you demonstrate that your company operates in a sector that has a large Total Available Market (TAM) size? Buyers want to see that you have some “special sauce” enabling you to garner more than your fair share of the market and that you have an ability to grow on a national or worldwide basis.
  • Sales Strength

    —Buyers will closely evaluate your product’s contribution to their future revenue growth. Can your product be quickly bundled with the acquirer’s existing product and sold immediately?
  • Team Strength

    — Buyers will often hire most of the management team and the majority of the technical team. They will be very interested in both the experience and chemistry of those teams. Can you demonstrate how your management and technology teams are uniquely able to set your product apart from the competition


  • Proprietary intellectual property is important to a buyer and will be scrutinized. Some key questions a potential acquirer will ask include:
  • Is your IP protected?
  • Do you have patents awarded or in process? Are they defensible?
  • Is there a way to extract some additional value from your patents?
  • Do you have trademarks? Have you protected your branding in North America as well as Asia and Europe?


  • IT buyers or venture capitalists will want to know the quality of your current institutional investors.
  • Are they prior operators or executives from tech companies?
  • Do you have what’s known as the “gray-hair” factor?
  • Do you have seasoned, independent board of director members and industry advisors?


  • A buyer will be very impressed if you can show special “barriers to entry” that give you a strong market advantage.
  • How large are your competitors? If you’re selling a product that competes with a very large company, it’s critical that you can demonstrate how you’re moving into a new area where the large company can’t catch up. No one is going to buy your company if you’re competing head to head with a large, well-established company on a similar product.
  • What’s your breakthrough solution? There are many mature, existing technologies and products in the market, so you should be prepared to demonstrate a breakthrough.

Today’s buyers are ruthless when it comes to due diligence, so it’s imperative when entering into a potential transaction to perform a brutal self evaluation and then have everything a buyer will want to examine organized in a virtual data room ensuring that nothing the buyer might be interested in seeing is inaccurate or missing.

Being prepared can make the difference between a good deal and a great deal, or even a deal that goes through versus one that dies. Don’t wait. Your company should always operate as if a buyer is right around the corner.

To learn more about achieving maximum exit value for your company download our free white paper: 

"The Art & Science of High M&A Valuation"