As IPO valuations fall in the ‘post unicorn’ days 2016, a successful exit through acquisition becomes the dream of many entrepreneurs. In a recent seminar in Palo Alto CA, investment bankers, financial and valuation experts agreed that while the overall volume of mergers and acquisitions has declined by 20-25% since the record 2015, there are still opportunities for success.
For companies in the technology, life science/MedTech and energy sectors, US buyers are interested. In fact, in the past 12 months, 45% of the acquisitions in the US have been by or of international companies. In technology Microsoft, Google and Intel are leading the charge. Overall returns are today are an average of 8.1 times EBITDA (earnings before tax and other expenses).
If capital is needed to prepare for an ultimate acquisition, Private Equity firms are strong contenders ownership for a 2-3 year period in preparation for ultimate acquisition. Many of these firms seek technologies or services that are complementary to their current portfolio – sometimes resulting in consolidations or mergers to deliver a lucrative return to the founders of both organizations.
While funding may be in a decline, exits through acquisition and/or PE investment remain alive and well in Silicon Valley.