Software M&A: Sourcing Targets

What was the biggest challenge for you, pre-acquisition?

Biggest challenge would definitely be finding the targets. No doubt about it. Finding the targets and trying to track them down, to talk to them. If you’re talking to a business, it’s not that easy, you can’t ring the receptionist and say, I’m interested in buying this business. Can you put me through to the managing director? First of all, I’d build a list and probably would end up with quite a long list of about 50. In fact, business intelligence would be a good example, when I started with a list of 100 companies that did business intelligence. You’ve got to have a quick squizz at what they look like on their website and probably eliminate half of them straightaway, as being nothing businesses.

We would be buying, predominantly, UK businesses. We only ever bought one business from overseas, in my time, which was in France. You’d be looking at their Company House records, what the financials look like, who are the directors. Then you would try tracking the directors down on LinkedIn. LinkedIn is a key tool; couldn’t operate without it. They’ve made it a little bit harder, because you can’t send numerous in-mails and all the rest of it. But you’d track them down through LinkedIn. Then you’d try by phone. Phone is hardest because firstly, it’s quite hard to make a cold call. Secondly, you get a lot of, no, I can’t put you through to the managing director and no, I can’t give you his email address. Sometimes, there would be someone we just couldn’t get through to. Whether we liked it or not, there was just no way.

We might write a private and confidential letter to the MD. Very, very low rate of success with that. Good rate of success with LinkedIn. We would probably get a response rate of one in three. Of course, then you get a load of nos. No, we’re not interested. You get the, no, we’re not interested and it’s firm. You also get, no, we’re not interested, but we wouldn’t mind chatting. Then you have a chat and you find, actually, they are interested. Then you get the ones that are, yes, we’re very interested in having a chat.