Acquisition Market Outlook

The beginning words of “Outlooks and Strategies 2009” from New York investment banker BerkeryNoyes aptly summarizes the current environment for high tech companies pursuing an acquisition exit strategy:

Amid so much uncertainty, there are at least a few predictions we can confidently make for 2009:

  1. Demand for information will continue to grow.
  2. Middle-market M&A transactions will continue to get done.
  3. The sun will come up tomorrow.

Beyond that, there's not a lot to be certain about in the coming year. But that just may be enough.

The outlook at the beginning of 2009 was not encouraging. The apparent impending collapse of major financial institutions introduced a significant level of confusion and despair to the general market. A grim presentation leaked from Sequoia Capital three months earlier urged startups and their investors to take drastic action to achieve and maintain profitability, suggesting that many small to medium companies would soon be in dire straits.


Mckinsey & Company

On a more encouraging note, a study completed by McKinsey and Company in August 2008 confirmed the fact that the most successful larger companies see an economic downturn as an opportunity to enhance market share and strategic offerings through acquisitions, rather than as an imperative to pull in their sails and wait for better times.

“Simply put, countercyclical investment can separate the leaders from the also-rans. Arguments that state that growth is risky in a downturn overstate the case.”

Nonetheless, a December 2008 survey by the National Venture Capital Association reported that 93% of VC respondents believed that it was going to be harder to sustain existing portfolio companies in the coming year, with 72% indicating they didn’t expect the IPO market to reopen for their portfolio companies until at least 2010.


NVCA

Clearly, CEOs would like to evaluate the market position of their company, find the most direct path to an exit, and execute partnerships and M&A events that accelerate the exit strategy.