Initial public offerings (IPOs) were the preferred exit strategy of technology companies and their venture capital backers for a long time. But the pendulum has decidedly shifted to mergers and acquisitions – the M&A game.
Technology M&A is beating IPOs as the exit strategy of choice by a ratio of at least 20:1 according to HP's Ray Wu. There are several factors behind this trend: (1) higher revenue requirements to go public, (2) SOX (Sarbanes Oxley) compliance costs and complexities, (3) acquiring companies having lots of cash, (4) VCs looking for smart exits and (5) profitability standards.
Last year investment bankers saw tech sector M&A deals rise by more than 75 percent, exceeding $340 billion. The tech gorillas led the way. Microsoft orchestrated 22+ deals over a 12-month period (one of these involved Beaupre client Groove Networks). Last year was also a busy year for IBM which did 16 deals.
How PR fuels M&A traction
With more tech companies getting acquired, how can PR help position them for a successful M&A 'end game?' Here are the top 10 lessons learned from our M&A experience:
- Communicate market leadership – Tech gorillas can quickly replicate nearly any technology if they set their mind to it. Knowing this, PR should stress the attributes that define a company's market advantage: (A) the marketing channels built, (B) sales traction gained, (C) market segments where a company is stronger than potential suitors, (D) the value a company brings to the marketplace and (E) the service/support infrastructure built.
- Highlight customer traction – Great products without customers benefiting from them is classic tech dinosaur history. Technology companies get acquired because they've built a revenue and profit stream that's attractive. PR should feed this with a steady stream of customer-focused visibility. But remember to mix it up: there are more than 30 different ways to showcase customer traction beyond the basic news release.
- Build a larger-than-life personae – If your company is currently in a second or even third tier position – and it has the substance to get acquired – then you need a game plan to move your company upstream. PR can support this objective by remembering one simple M&A truth: it's not about size, it's about smarts. Be more decisive, move quicker and above all, shape the agenda of your marketplace vs. going along for the ride.
- Stir the pot – You can increase your company's chances of being noticed – and getting acquired – if you are bold. Public relations – and new social media like blogs, podcasts and RSS feeds – are a natural way to broaden discussions and stir up controversy.
- Focus on IP not IPO– Unlike the IPO-laden boom of the late 90's, today's M&A game is all about intellectual property advantage, not hype. PR must support this reality by constantly expressing the differentiated value proposition of a product and/or service. The more direct the competitive context in which you paint your picture, the better.
- Entrench yourself–CEO's focus on how their strategic PR partners immerse themselves in their client's business to help trigger their 'end game' objectives. Whether you're a key internal contributor or outside counsel, this factor, more than any other, contributes to ultimate M&A PR success.
- Look down, not just up –Great PR that helps get companies acquired isn't just based on the tried-and-true. Go beyond a limiting "my company, my products, my news" view to forge issues-based platforms that help customers, partners, prospects and potential suitors look at your company in a different, and less myopic light.
- Spotlight key people–The number one acquisition 'must have?' Human talent. Successful PR programs showcase key players in appropriate ways: their experience and practical vision. Don't forget to also spotlight engineering and R&D teams because they are viewed as a jump-start advantage by acquiring companies.
- Think 'barriers to entry' – If your company wants to be acquired, then it must put itself in the mind's eye of acquiring companies. They are interested in areas most difficult to duplicate. Focus on the pragmatic lens of acquiring suitors.
- Hit singles and doubles – Finally, it's nearly always more valuable to create a pattern of communication consistency. To build brand awareness – and get noticed – on-base percentage is a more important stat than occasional home runs.
- Andy Beaupre
