Tech M&A Preparing your tech business for sale

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Tech M&A Preparing your tech business for sale

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CONGRATULATIONS! You have an offer You've attracted a possible buyer: 2 But what's next?

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The due diligence process The acquirer will now look closely at your company: Financials Operations Systems Performance 3

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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

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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>

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#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.

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#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.

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#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>

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#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.

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#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.

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#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.

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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

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Marc Chiang Partner Transaction Advisory Services Grant Thornton LLP 415.318.2206 [email protected] Steven Perkins Managing Director Technology Industry Practice Grant Thornton LLP 703.637.2830 [email protected] Information Contacts 13 Ready to start your own pre-deal due diligence review? Contact Steve or Marc today.