Q1 2016 Tech M&A Update

While the tech industry may not repeat the same record-breaking deal volume it experienced in 2015, the consensus is that 2016 will be a very active year for technology M&A.  

According to prominent venture capitalist, Marc Andreessen, Microsoft’s planned acquisition of LinkedIn is indicative of an imminent increase in M&A across the tech sector.  Andreessen predicts there will be many deals through the remainder of 2016 and the entirety of 2017, asserting that there are numerous deals that should have already happened, but have not occurred yet.  “Most of the big tech companies have done very well over the past five years, they’ve piled up lots of cash, and they have to go shopping,” affirmed Andreessen on Tuesday, June 14, 2016.

Tech M&A is also on the rise globally, accounting for roughly 14% of M&A deals worldwide in Q1 2015, which was the most of any industry.  The chart below depicts tech deal volume and value in Q1 for the past five years.  Overall, global Tech M&A deal volume peaked this past quarter (Q1). 

Just recently, Microsoft Corp announced its planned acquisition of LinkedIn Corp in an all-cash transaction deal valued at US$26.2 billion.  According to Mergermarket’s records, the deal is the third highest valued deal within the US technology sector since 2001 and has consequently given a much needed boost to the sector’s current M&A activity.

Thus, despite a slow start to the year and a lack of momentum, M&A activity in the US tech sector is back on track to match last year’s record.  833 deals worth US$254.7 billion were struck in 2015, which overshadowed 2014’s record value by 94.7%.  According to Thomson Reuters, US$209 billion in tech transactions have been announced so far this year and these deals are expected to close by year end.

Versailles Group 

Founded in 1987, Versailles Group is a boutique investment bank that specializes in international mergers, acquisitions, and divestitures. Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies in the middle and lower-middle market. Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services and has been completing cross-border transactions since its founding in 1987.

For additional information, please contact

Donald Grava

Founder and President

+1 617-449-3325

M&A - The Letter of Intent

When a business is being sold, a buyer typically makes an offer for the business.  Next, the seller responds with a counteroffer, which is followed by the negotiation of terms and then the execution of a Letter of Intent (“LOI”) by both parties.  Sometimes, the LOI is called a Memorandum of Understanding (“MOU”).  To summarize, the LOI or MOU documents the buyer’s proposed price and terms.  Once the LOI is signed, due diligence begins, during which the buyer confirms the condition of the business and the seller confirms the buyer’s ability to complete the deal.

Even though an LOI, or MOU, contains terms that are still negotiable, buyers often get nervous once the document has been executed.  During the diligence process, they start double and triple-checking all of the details.  Part of the M&A advisor’s job is to facilitate the buyer’s diligence, reassure the buyer, and keep the process moving towards a closing.  

Generally, LOIs and MOUs are not binding, but many buyers and sellers view them as binding contracts.  Therefore, these documents often include contingencies; more specifically, conditions to be met before the offer becomes legally binding.  However, certain other clauses of the LOI or MOU will be binding, e.g., exclusivity, confidentiality, timing of the transaction, etc.

Signing the LOI or MOU usually takes the company off of the market during the exclusivity period; thus, the seller should be sure to do some diligence on the buyer’s financial ability before signing.  The deal will not close if the buyer cannot pay the purchase price.  Thus, it can sometimes be advantageous to accept a lower price from a financially capable buyer as opposed to a higher price from a potentially financially unstable buyer.

Finally, it is critical to thoroughly review the LOI or MOU with an attorney.  The seller should also seek advice from their M&A advisor and CPA, if necessary.  Sellers should be careful not to focus only on the proposed sales price as there are many factors that affect how good or bad the deal is for the seller.

Founded in 1987, Versailles Group is a boutique investment bank that specializes in international mergers, acquisitions, and divestitures. Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies in the middle and lower-middle market. Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services and has been completing cross-border transactions since its founding in 1987.