Hero dark

Our M&A
Process

At ValleyBiggs, we consider ourselves a Boutique M&A Firm because we only handle Technology, eCommerce, Internet and Digital Companies. Additionally, we only handle Private Lower Middle and Middle Market Transactions. Our family of expert intermediaries is all from the technology space, whether as founders or as operators, so we have not only represented countless Tech Companies through the exit process, but we’ve also operated these companies ourselves. This mix of background, skills and focus is very difficult to find elsewhere. Our goal is to ensure that no stone is left unturned to maximize a company’s Enterprise Value at market, and just as important, to negotiate the best Deal Structure possible for our clients. We are market makers in our field, and we love what we do.

What Makes ValleyBiggs Unique?

When you want to sell your business, it helps to have a team of experts by your side to guide you through the process. At ValleyBiggs, we’re more than just buyers and sellers. We’re attorneys, accountants, consultants and serial entrepreneurs who have represented well over $2 Billion worth of tech companies at market. And our extensive experience within the Technology, Internet, eCommerce and Digital space gives us leverage over the competition. You won’t find many firms with the background, experience and volume that our team holds.

ValleyBiggs has sold a wide variety of digitally native companies, including:

  • Software companies
  • Amazon and
  • eCommerce businesses
  • Digital Marketing Firms (SEM, SMO, Email,
  • Influencers, Affiliate, etc.)
  • Premium Websites and domains
  • Technology and IP companies
  • Business services
  • Internet businesses
  • MSP and IT Solutions
  • Web, app and software development
  • Advertising and marketing services
  • CRM, ERP, CMS, IMS and similar services
  • eLearning, education tech (edTech) and online education
    Financial Technology (finTech) & Medical Technology (medTech)
  • Mobile apps and mobile games
  • Subscription model businesses
  • Podcast industry companies
  • Masterminds, communities, groups and trade shows
  • Data management and hosting companies
  • Web and mobile app design and development, API and plug-in dev
  • Influencers, affiliate companies and affiliate networks
  • Manufacturing companies
  • Artificial Intelligence (AI) and robotics

We also have experience selling traditional businesses as long as they have a digital footprint that makes sense for our platform. While we are not focused on the Brick & Mortar space, we certainly have sold many companies that have offices, locations and storefronts in addition to a digital footprint.

We Understand Your Business

Our team is full of business owners and professionals, so we understand your needs and have the knowledge necessary to sell your business for the greatest value. Plus, we know the ins and outs of building software platforms, creating websites from scratch, search engine and social media marketing and optimization, managing paid media, selling on Amazon, Walmart, Etsy and other online marketplaces, creating API integrations, plug-ins and data feeds. With over two decades of experience in the Tech sector, we can be that conduit that helps explain the operations of a Tech company and the excitement and value propositions behind it.

Fast personalized service

The ValleyBiggs
Approach

Read on to learn how ValleyBiggs handles the M&A process from start to finish.

Step 1: Review Operations & Financial Statements

In M&A, we start with the fundamentals of the company – the business model and its operations and the company’s financial/economic makeup. We first need to understand your business, its value propositions and the opportunities of scale. Once we have this, we do a deep dive into a company’s financial statements to ensure that the company’s economics are properly set forth in the reports we will be presenting at market and put the company in a light most favorable to its shareholders. This includes an analysis of the accounting method used, a deep understanding of COGS and SG&A drivers, identifying notable trends in the LTM and prior years, identifying all KPIs with the historical financials, and creating a projection for future sales and earnings.

Oftentimes, the projection and budgeting process can be a fundamental driver to achieving higher multiples, and this, in turn, can also identify which valuation method is used during the process. Whether a SaaS company that is heavy in labor and burning cash to grow or an eCommerce company developing its inventory to launch in foreign marketplaces, we need to ensure that historical statements and future projections shine a light on the best parts of this company and its value proposition (which aren’t always just financial drivers) as we prepare to find an investor or partner for a target.

Close up of the hand of a business woman using

Step 2: Value Proposition, Moats & Differentiating Factors

Our team works with clients to identify and create narratives around what makes our client’s company special. This includes a company’s Key Performance Indicators using a company’s own internal metrics and comparing the company to others in the marketplace for comparable analysis. Our team also will work with clients to identify what Intellectual Property and other moats are present, which tends to increase the value of the company due to its defensibility against competitors. Another important value driver is what differentiates our client’s business from its competitors.

These opportunities are discussed with clients and narratives are created for both pitching and valuation purposes. In the tech space, every deal is unique in its own way and requires a fresh analysis – comps are simply used as a baseline – but well beyond this is usually a bevy of factors that make each business what it is, and what it will become.

Value proposition

Step 3: Market Analysis & Valuation

After a thorough analysis of a company’s economics, operations, defenses, and opportunities, we will then be in a position to provide a full analysis of the real-time Enterprise Value Range for the business. In our sector, client companies do not have a single value they can be pegged to – they have a range – and sometimes that range can be quite large. That range comes from multiple valuation techniques, hundreds of factors and data points, and an understanding that tech companies hold different values for different buyer profiles.

Therefore, we present a value range – along with our recommendation for an initial Asking Price. However, we leave the ultimate decision on our pricing strategy to the client. As long as the client is reasonable and isn’t proposing a valuation that is impossible in any market, we will go to market as directed by our client.

But the valuation itself isn’t as important as the team that takes the company to market. That’s where our expertise in this sector comes into play. With thousands of comparable companies sold and a full awareness of all the investors and buyers in the space (along with a massive following at all of our M&A firms), we are able to deliver for our clients the higher end of valuation ranges while maintaining acceptable deal structures and a strong buyer pool during the process by driving demand for our transactions.

Market analysis

Step 4: Create and Execute an Exit Strategy

Creating and executing an exit strategy is an essential part of the M&A process. And it’s 100% about the team that steers the deal.

The biggest mistake a company’s shareholders can make is in picking a sell-side firm that isn’t representative of their vertical or that lacks a successful track record in the marketplace. Some M&A Firms will bloat their valuation process to lure clients into working with them. For us – we provide what we believe is the proper valuation range for a business based on our experience and actual market knowledge. We recommend an asking price, we consult as necessary, and then we ask the client to make the ultimate decision on where we price at market. We listen to our clients and allow them to be as aggressive as they want at market.

And we back up our process using a 100% Success Based approach. We do not charge any fees, we do not require an Audit or Quality of Earnings report prior to listing, and we don’t require our clients to jump through hoops to work with us. Our tech stack and staff make the entire process seamless.

Importantly, the exit process can take weeks, months or even years, depending on the client’s goals and their position in the “exit funnel.” Some might want to work with us for a number of months or years to ensure they are maximizing their value when they ultimately go to market. Others might be ready immediately after the strategy is born. In either case, we are there every step of the way, managing the process and never putting stress on the client.

Our team uses their background in operations and experience in closing thousands of deals to give advice on best practices, market norms and creative strategies to ensure that the ultimate deal struck, from both a structural and operational standpoint, is in tune with a client’s needs. Our team will consult with clients on a number of items to ensure we’re taking a business to market at the right time, using the right KPIs and narratives, and targeting the right audience to ensure we’re in a position of strength while at market. All of this consulting and strategizing will be very valuable to you, and importantly, you will not pay us for this work until we ultimately prove our worth – since we are 100% performance-based, we only achieve success when you do – fully aligning our economics with yours to ensure that everything we are preparing for the market is real, based on fact and achievable. No pie-in-the-sky valuations here.

Since we are aligned at every phase of this project, everybody is laser-focused on one thing: closing. And importantly, our consultation isn’t just in the exit strategy planning stage but in every phase of the deal until the day we close. You can trust us to provide full-service, end-to-end management of the entire deal process.

Exit strategy scaled

Step 5: Marketing Collateral

We have a team of experts, analysts, economists, writing professionals, designers and administrators that collaborate with our senior advisors to create pitch decks and marketing collateral that properly reflect every aspect of a business. We invest a lot of time, energy and money into a workforce that understands how important this collateral is to the process, and importantly, no materials are presented to any potential investor until it has been signed off by a firm’s senior partner and the steering committee for the business. In addition to the main pitch deck, other important collaterals are created as well, including investment summaries, financial summaries, teasers, and executive summaries. And since nobody knows a business like the founders, we collaborate to ensure the vision we intend to impart from this collateral properly matches a founder’s vision of the business and the partner/investor they are looking for to take the reins of their business.

Marketing collateral

Step 6: Managing Deal Points and Negotiations

Another important value proposition we offer – managing and negotiating all deal points and representing Founders at each stage of the exit process for all negotiations.

Since the point of most transactions is to ultimately partner up with an acquiring team to take the foundation of what was built to the next stage in the company’s journey, the last thing a Founder wants in the deal-making process is a bad taste in the mouth about the other party. This can easily happen if you are negotiating all of your own deal points, but with a strong intermediary in the middle, managing the parties’ expectations and pushing a mandate as far as it can go, clients win in two important ways.

First – a client will remain on good terms with the buyer post-closing. Second, a client can rest assured that he or she has a highly experienced intermediary fighting tooth and nail to achieve the best deal possible (rather than a client trying to negotiate things on their own – a very bad idea). This experience we offer can only come from managing and closing deals – as with airline pilots – you need flight time to gain the experience necessary, especially when something bad happens. In M&A, something is always breaking in a deal, and you need a strong intermediary there to both see those issues coming before they arise, as well as to use creative strategies to solve those problems rather than letting them fester to the point where they could break a deal. This is tedious work – roughly 95% of the M&A Intermediaries in existence are poorly trained and lack the skills necessary to both maximize transaction values and keep deals alive when issues pop up. These things require an Intermediary to be highly experienced in actually closing deals in a sector matching the client and a highly trained professional who can fly through even the darkest of storms and still stick a landing. And just like with pilots, we never fly alone – we collaborate as teams for our clients to ensure that every deal is closed efficiently and on the best possible terms for our clients.

Managing deal points

Step 7: Create a Target Audience

This process is another big value proposition for all of our clients. We and our sister companies in the Technology Space have over 1.3 Million buyer followers from all over the globe. Our teams start with a foundation of potential investors that are consistently looking for transactions and investment opportunities that match a client’s profile; these investors follow us because of our deal volume and performance in the space but also because we only focus on companies with a material digital footprint.

But well beyond our followers, which we understand is the largest following of any Mergers & Acquisitions Firm of any size worldwide, we have a network of VIP buyers that we build relationships with, pre-vet and oftentimes close multiple deals with. This VIP buyer network includes single and multi-family offices, private equity groups (sponsors and funds), hedge funds, angel investors, venture capitalists, wealthy investors, portfolio buyers, aggregators and strategics. These buyers are experienced; they’ve likely already closed deals with us, they are focused on tech and are highly motivated to close deals.

And finally, our analysts will use a proprietary, in-house system to put together an outreach strategy that targets strategic buyers that are either in your vertical or an adjacent vertical. Our goal here is to ensure that if a group isn’t following us, yet they are in your particular field, we want to ensure they at least have the opportunity to learn that an important deal is coming on the market. This will be done in a highly confidential manner with very little upfront information provided … just KPIs and high-level performance metrics to motivate them to want to talk to us and learn more.

All three of these types of buyers are critical to our process and will be used to maximize a deal’s exposure on the market. However, we understand that certain clients desire a limited target range (at least at first), regardless of the known benefits of driving up deal value through demand … and we have no problem supporting those clients in front of only those buyers requested. A deal’s target audience will be discussed and finalized during the exit strategy development process.

Create a target

Step 8: Manage Buyer and Seller Mandates

As they say, it takes two to tango. It’s the same thing in M&A – without both a buyer and a seller – there can be no deal. We take the mandates of both parties seriously and work hard to manage the expectations of both sides of a deal throughout the process.

For business owners, the exit strategy process largely creates the mandate that the owners want to focus on in the M&A process. Once that mandate is in place, we set expectations as it relates to that mandate and then inform all buyers interested in the transaction of the mandate. This helps to reduce bringing the wrong buyers to a deal due to a mix-match of mandates. For example, if a client informs us that she prefers to only remain with the acquiring company for 6 months post-closing, then we need to not only respect this mandate but ensure that buyers are aware of this mandate because some buyers might have a 1-year commitment rule in place.

For buyers, even though we don’t represent them in the deal-making process, we still work hand in hand with them to get the transaction completed … and this includes getting a full understanding of their mandates and any debt/equity covenants that are required in any transaction they contemplate. Knowing their mandate up front and comparing it to the needs of our client ensures that we’re only focused on the right buyers upfront … and helps to avoid issues down the road.

Manage mandates

Step 9: Buyer Qualification

Once we find buyers that match our client’s mandate, there’s the important element of qualifying that buyer. Since our firm only operates in the lower and middle markets, qualification comes in two forms (in other words – there are two kinds of buyers). One buyer is a “balance sheet buyer” … this is a group that’s fully funded with money in-house with no intentions of raising any level of capital to close a deal. The other buyer does need to source some level of the capital required – from a small amount to the whole deal.

Balance sheet buyers are pretty easy to qualify – we request access to their current balance sheet, and we see the current assets clearly in front of us.

Buyers that include a financing contingency in their offers come in many forms and varieties. Some might be “sponsors” who will run diligence on a transaction, perform a QoE and then sponsor the deal in the capital markets in order to raise the debt and/or equity necessary to fund the transaction. These private equity groups (PEG) should not be discounted just because they intend to use a leveraged buyout approach since many M&A deals are consummated with this approach; however, the deal intermediary will be looking for some important items, including the PEG’s specific experience in raising capital in the particular vertical upon which the target sits and the status of other deals in the PEG’s portfolio. The intermediary will be laser-focused on ensuring the Letter of Intent includes benchmarks and a Gantt chart that keeps the sponsor’s feet to the fire and allow the client to exit the deal if those benchmarks are not met.

A hybrid of other buyers exists that might use the capital markets for a portion of the deal, or they might have Lending Partners in place that they have already struck deals with that allow the buyer to purchase certain businesses as long as certain covenants are met. There are a large variety of these kinds of relationships as well. The deal intermediary will be focused on the Sources and Uses of the funds (on this and sponsored deals) and will dig deep into the Lending Partner relationships to ensure the client is not getting into a deal that is outside any relevant covenants.

In addition to qualifying a buyer for the ability to source funding for the down payment, we also vet a buyer based on their ability to achieve funding through lines of credit, working capital loans and other credit facilities to be a financial partner for the business after closing in order to help the business grow. Part of the reason why many business owners look to merge with a partner is so that they can have access to capital, which can be very difficult to obtain on one’s own.

Buyer qualification

Step 10: Engage with Multiple Buyers

As noted above, a big value proposition with our firm is our massive buyer following, our buyer development program and our proprietary, in-house system for finding target audiences within a client’s vertical or its adjacent. Inevitably, with this many buyers looking at a deal, you end up with several offers. This is what we want. Once we have several offers in hand, we can work with our client on the best-fit buyer – we look for financial capabilities, the likelihood of closing, whether this will be a good partner to fill gaps where current ownership is lacking, the structures offered, and many more things. Ultimately we decide on a buyer we want to focus on and negotiate the very best deal possible, ensuring that the LOI is not skinny, but fully burdened with all the necessary items that protect the client from a buyer that isn’t living up to her hype.

Multiple buyers

Step 11: Enter a Letter of Intent (Go Under Contract) & Begin Diligence

This is when the real fun begins. At this stage, we have identified the best-suited, most financially sound buyer among those we have spoken to, we have agreed upon the major deal points, and our client is ready to sign an LOI that places us in a no-shop position. Once fully signed by all parties, we manage a secure data room for the transfer and management of confidential materials using a state-of-the-art virtual data room platform, and we begin the due diligence process with the buyer. This oftentimes requires a significant amount of work for ownership for the first 1-2 weeks, but most of this work is usually already complete since we prepare our clients early on to begin amassing paperwork, so that much of the initial due diligence request list is already ready to be propagated into the VDR. As we go through diligence, questions will pop up and usually deal points will have to be negotiated. Ultimately, we complete diligence and usually move into the Quality of Earnings stage.

Enter a letter of intent

Step 12: Introduce the Buyer to Debt & Equity Partners

Given our vast experience in this space, we have many relationships within the capital markets, including large banks, mezzanine funds, PEGs, family offices, hedge funds and others that provide debt and equity financing to Lower and Middle Market transactions. If deal partners fall through or buyers are simply interested in receiving term sheets to show other options, we will introduce these partners. These partners have closed with us in the past and are comfortable working in the Tech & Internet space … not something all investors are still comfortable with.

Debt equity partners

Step 13: Manage the QoE

Most deals in the lower and middle markets require a Quality of Earnings or an Audit to support the financials provided by ownership. Normally the QoE is all that is necessary. A QoE is a financial report developed by a third-party accounting firm that analyzes the earnings power of a business to determine the sustainability and accuracy of historical financial statements, as well as the likelihood of the company sustaining these earnings after closing. Specifically, a QoE report reviews the company’s financial information and reports how well the underlying data relates to the financial statements. A QoE is oftentimes related to home inspections … where the purpose is to identify any hidden risks before the transaction is completed. If issues pop up in a QoE report, we will be there to negotiate and manage the process.

Manage the qoe

Step 14: Manage the Legal Process

Even though we have attorneys on staff, it would be a conflict of interest for us to represent a client both on the deal and legal points since we earn a commission on the sale of the business. But, there are many ways that we collaborate with attorneys during the legal stage. First, we introduce our pool of third-party attorneys to our clients so they can interview them for representation during the legal phase of the deal; these are attorneys that have closed many deals with us and understand the nuances of deals in the Tech & Internet space. Second, once an attorney has been selected, we work hand in hand with them to ensure that all legal responses in diligence are managed, and if issues pop up, we are there to mediate. We also ensure that the disclosure schedules are managed, that all negotiated deal points are included in the definitive agreements and that all parties are continuing to move towards closing and not getting bogged down in legal issues.

Manage the legal process

Step 15: Prepare for Closing, and Close

After all of that hard work, it sure feels good when you see the funds hit your bank account. Our prior clients all tell us how much excitement they get to finally see the realization of all of their hard work. In preparing for closing, we want to ensure that the parties and all the various third parties involved in the deal are staying focused on the deal and turning in documents when they are supposed to. If last-minute negotiations are necessary – we manage that. Ultimately, we are funded into escrow, and we close.

Closingand close

Let’s Start Your Journey

We’re business owners and serial Tech entrepreneurs ourselves. That means we understand how your business operates from the inside out. Most advisors don’t have a well-rounded understanding of the space, or how to quantify the value proposition a Tech or Internet business offers. We can. The insights and understanding we’ve developed in two decades of buying and selling Internet companies make us the perfect choice to be your business broker. Our clients love us – and you will, too.