Despite the war in Ukraine, accelerating inflation and rising interest rates, the technology sector has still seen M&A take place in the United States. The first half of 2022 included major tech mergers and acquisitions, including Microsoft acquiring Activision Blizzard for $69 billion, Google buying Mandiant for $5.4 billion, and Elon Musk bidding on Twitter for $44 billion.
Private equity was also active in the technology sector, with Thoma Bravo buying SailPoint for $6.9 billion and Vista Equity Partners acquiring Citrix for $13 billion. Cross-border tech mergers and acquisitions include Deutsche Telekom’s acquisition agreement with SoftBank Group and T-Mobile US for $2.4 billion and Siemens acquiring Brightly Software for $1.8 billion.
European and Asian companies can compete effectively with both US companies and private equity through greater responsibility for post-trade target management, flexible transaction structures, and worldwide distribution of the target’s products sold with the acquirer’s sales force. By understanding the key issues of cross-border technical mergers and acquisitions, an international acquirer can close a successful transaction and achieve its commercial goals in the United States.
Management teams, boards of directors and shareholders have had time to adjust to the fall in valuations and will be more susceptible to a takeover at a reasonable price.
Before approaching targets, it is important to establish detailed acquisition criteria.
Acquisition criteria may include sub-sector, product set, revenue, profitability, and customer profile. It should also include more intangible aspects such as vision, culture and strategy. The strength of the management team is also important, especially if the international acquirer follows the private equity playbook and acquires a platform company with the intention of later acquiring smaller add-on companies. Finally, practical criteria should be considered, such as geographic location – if the international acquirer is in Paris, a flight to the East Coast is much shorter than a flight to California.
Once the acquisition criteria are established, in-depth target research is required. This research should include target funding, capital structure, leadership and reputation in the industry. Research should include databases such as Capital IQ, PitchBook, and Crunchbase, as well as confidential discussions with industry leaders at other sub-sector companies and industrial trade groups. This insider knowledge of the industry can be very powerful.