The TiE-Boston met on Monday, June 30th at the Burlington Marriot to discuss Mergers and Acquisitions (M&A) Trend in IT and Healthcare industries. The panel consisted of Tom Cibotti, Partner, Covington Associates, and Richard Vieira, Managing Director, Broadview. The event was moderated by David Barbash, Partner, Nixon Peabody LLP.

Both Tom and Richard gave examples of M&A activities in the recent past. These included specific companies like Think Dynamics, an early stage company, which was acquired by IBM and general acquisitions of one venture backed privately held disease management company by another ventured backed privately held company.

Even though times are tough, “deals are getting done.” What is important in today’s market place is that the companies are looking for “must have” rather than “nice to have” specific acquisitions. Every company is facing with the situation of “build v/s buy” and as such it is important to have working and/or licensing agreements with the companies whom you want to acquire or be acquired by. Look at companies who you think might acquire you and work to integrate product/business developments with them. What has changed is that today is that companies can find more reasons why not to do transactions rather than do transactions.

According to Tom, “Gone are the days when one could expect to close a deal between 30 – 60 days. Today it typically takes 6-9 months.” Most companies looking to make acquisitions are taking a ‘wait and see’ attitude to see if they can get a better deal. As compared to last year, the market is better today but companies still do not sense a need of urgency.

Even though the valuation have gone down in general, the current valuation of companies less than $ 500 M in revenue is much lower as a fraction compared to valuation of companies with more than $ 500 M in revenues. “The current focus is on multiples of earning rather that multiples of revenues,” says Richard.

Where are the current M & A activities? In the IT industry, the focus is on companies who are leaders, typically the first or second company to enter the filed. Today, only the top two companies can expect to have good evaluations. For the third company and others, the evaluations drop of rapidly. In the Healthcare industry, the focus is on disease management companies such as those that focus on diabetes.

In response to the questions from the audience, Tom and Richard mentioned that there is not much consideration given to the cultural issues in the due diligence process in domestic deals even though there are a number of cases of failed mergers, cross border M&A are taking even longer, most deals today are cash transactions and there is more focus of team staying in place once the M&A deal is complete.

Overall, the speakers were effective. However, it would have been very helpful if the speakers gave a compressive overview of the current M&A process, as it was clear that a number of people in the audience didn’t not even understand the nuts and bolts of the process.

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