In my last post, I referenced Basil Peters' great book - Early Exits - and how the technology investment of choice is "small ball": Putting small amounts of money to work in companies with game plans of quick sales to strategic acquirers within 3 - 5 years.
Well, in response, I have been inundated with variations of one of the two queries:
1. How does the current, sluggish deal environment affect this strategy?
2. Where can I find companies that meet this criteria?
Let's take these one by one.
First of all, the current deal environment - if you have an ounce of contrarian in you - should be best described as a dam ready-to burst.
Try these numbers on for size: Mergers and acquisitions activity in the past 24 months has more than halved - with only 7,300 deals closed in 2009, representing approximately $803 billion in deal value.
Compare this to the more than 13,000 deals representing $1.38 trillion in value that got done in 2007 - the last "normal" year.
The YTD date deal numbers for 2010 are even worse. While the number of deals will, in all likelihood, show an up tick, deal values are actually significantly behind the abysmally poor 2009 numbers.
And while this has happened, an enormous stash of cash has built up in the coffers of companies and private equity funds worldwide, more than $3.4 trillion sitting on the sidelines in low to no-interest bearing cash instruments.
Now to this backdrop reflect on the following:
1. Speed of innovation remains, as it always has, the #1 driver of competitive advantage in modern business.
2. Large and mid-sized companies are more scared than ever of their ability to keep up.
3. Concurrently, it is only the startup and small technology company form of business that has proven to be able to consistently innovate at positive ROIs.
The result: a desire and game plan of companies of any significant size to BUY technology, and not build it.
Put it all together and a LOT of technology M+A activity in 2011 and beyond is the almost certain future.
So how can you get in on the action?
Well, two choices and two choices only - be a technology entrepreneur or back one.
As for which sectors to seek out, look for those with high quotients of intellectual property - think Internet, software, biotechnology, digital media, and energy. And ones characterized by high cash flowing "lumbering giants" - think consumer products, oil and gas, and financial services.
As for business plans, look for those that are built for speed and for hitting "hard singles and doubles" versus swinging for the fences.
And when hit in quantity, those singles and doubles REALLY add-up.
Webinar: Secrets of the Black Swan and The Early Exit
I encourage you to register for my webinar this Thursday - "Secrets of the Black Swan and the Early Exit" - where I will show you which early exit opportunities we are following now, and how you too can participate in the coming technology M+A boom.
To register, click here.
To your success,
Chief Executive Officer