July 31, 2020

Sharpen your pencils you salespeople, an M&A explosion’s around the corner

A tough experience for everyone, COVID-19 doesn’t appear to be slowing down any time soon. But, as the old saying goes, “It’s an ill wind that blows nobody any good.” Fundamental forces are at play and they’re set to create massive opportunities for IT companies.

Think about it. Many companies with sound business models and viable markets are bleeding cash. When furloughs start to fall away and debts must be repaid, many will run out of road, making them susceptible to predators or pushed into a forced sale. Depressed share prices will make others vulnerable, too. Consolidation will occur in stressed sectors like food and drink, hospitality, retail, and property. Operating in a buyer’s market, recruiters and HR outsourcers might find things difficult. Meanwhile, reports are suggesting the global private equity industry is sitting on ‘dry powder’ of more than $1.5 trillion.

Take all that together and the signs are clear. As we move towards 2021, mergers and acquisitions will take off and head skyward. Many mid-market deals will be pressured to complete quickly, as distressed stakeholders try to salvage something from the wreckage. But if we’ve learned anything from takeovers in over the years, the devil’s in the IT detail. Failure to get legacy systems to interoperate has wrecked marriages that looked no-brainers on paper.

But that was then, and this is now. Today we’re no longer forced to hold everything together with string and sealing wax. The cloud offers a platform to abstract apps and data above and away from expensive on-prem hardware. Software as a service allows systems to be brought together free of physical limit. Open APIs mean they can talk to each other, too, with minimal effort. VoIP provides telephony as a service, again without needing costly equipment, while the Microsoft Teams collaborative platform integrates global dialling into the UC domain. Others will follow suit.

So, there’s an M&A sales pitch just begging to be made. Anyone considering crashing two companies together and making the combination work seamlessly from the start will be mighty interested. The deal waterfall will commence before COVID-19 finally shuffles off, but it will initially be an in-country phenomenon until international travel restrictions lift.

Take our tip. Put together an M&A value proposition now – which we can, of course, help with. Keep your eyes open. Scrutinise the financial papers and the trade press. Track potential mergers and acquisitions on websites like Market Watch (there are many more). Then pick up the phone to the prime movers.

If you’re about to put pen to paper and need an expert hand, reach out to GoRefCo. We’d be delighted to help.

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