• Les Elby

A Roadmap for Tech M&A Success

Updated: May 17

There is a well-quoted statistic about how many (mergers and acquisitions) M&A transactions fail to deliver the promised benefit to the buyer; nevertheless, a well-executed M&A is a create driver of growth and value.


This article covers the critical things you need to consider when acquiring tech businesses.

How do you identify the right company to buy? How do you ensure the company you've acquired seamlessly integrates with yours? And what pitfalls should you avoid?


What makes a successful M&A

When it comes to mergers and acquisitions, beauty is in the eye of the beholder. The formula 1 + 1 = 3 is often quoted to describe the desired outcome. To achieve intended strategic goals, a company must be very precise and clearly understand why and where it needs M&A. Business leaders must develop high-level plans regarding what they intend to do with acquired companies.

Here are the key steps which will help achieve a success in tech M&A:

1) Ensure the proposed transaction is aligned with your corporate strategy.

2) Involve the right people.

3) Develop an investment plan.

4) Don't ignore cultural fit.

5) Conduct thorough due diligence.

6) Don't leave integration planning until the end.

7) Measure performance and learn.


We'll discuss all the points above in more detail in this article.



1) Ensure the proposed transaction is aligned with your corporate strategy.

When a company undertakes an acquisition, the transaction must align with the company's overarching corporate strategies. Therefore, early in the M&A process, the acquiring company should outline the acquisition rationale and alignment with its corporate strategy.


Acquirers need to outline the areas of value creation and competitive advantage. This includes new customers, markets or geographies that can provide an added benefit and obvious metrics such as revenue growth. Similarly, management must ensure that M&A doesn't create distractions from overarching corporate strategies.


With a clearly defined corporate strategy, filtering, scoring and continually cultivating potential M&A targets becomes much more manageable. Senior business leaders must establish and identify critical deal criteria to facilitate quick scoring (e.g. categorising potential targets by important metrics, geog­raphy, sales channel and solution type) and traditional screening criteria like company size, number of employees, profitability, revenue growth, product port­folio and capital structure.


With this approach to M&A, business leaders and the deal team can weave this into their business processes and continually identify potential targets, leaving headroom for opportunistic deal evaluation (including small deals).


2) Involve the right people.

It is good practice to keep an M&A insider list small. Still, it shouldn't be so small that the relevant business functions don't validate key perspectives within business acquisition goals and objectives.


The acquisition process can be challenging, so the deal team must contain a wider group of stakeholders, not just C-suite executives. Perspectives from appropriate business units will improve the company's ability to achieve its M&A business goals.


Establish a core cross-functional M&A team that can be involved in the diligence process and given ownership of different sections of the investment plan, integration plans, and post-acquisition objectives for the acquired business.


3) Develop an investment plan.

The investment thesis underwrites the entire acquisition. Therefore, it's a live document that should be maintained and updated across the deal's lifecycle and into the post-acquisition phase to measure success.


The plan outlines your reasoning for investing in a particular company or industry. It should include a company overview, the company's capabilities, your analysis of the industry and the competitive landscape, synergies and a preliminary integration plan.


Most importantly, the investment thesis must address why you're buying the company. The business case should identify important deal criteria (acquisition price), what you hope to gain from the acquisition (synergies) and how it helps your business achieve intended strategic goals (alignment with corporate strategy).


Use time with the seller before making an offer to develop the thesis to an advanced level. After the proposal (LOI) is agreed upon, use the diligence process to validate and refine the business case.


In our experience, when companies get caught up in deal fever and emotion takes over, diverting business leaders from logic and the investment thesis, the risk that important deal criteria will not be achieved increases. In addition, the quality of the investment thesis is proportional to the value created by the acquisition.


The investment thesis is the yardstick to measure the attractiveness of a deal and lets you know when to walk away.


4) Don't ignore cultural fit.


The importance of cultural alignment cannot be overstated. Unfortunately, this is where many acquisitions fail. When building one team, one company with a joined-up approach to operating, acquiring a company with fundamentally different priorities, business philosophies, remuneration and incentives won't work. The two businesses must have shared values.


People and culture are an essential part of due diligence. M&A deal teams must focus on the people side of due diligence. Look to identify star performers, make decisions on executive leadership and work with the target company's leadership team to understand how to get the most out of the targets team. Incentivise them to make sure people stick around after you close the deal.


For cross border M&A don't under estimate the differences in regional culture. Plan to connect overseas offices to the IT network quickly and communicate regularly them so they feel part of the organisation.


Remember, if product engineers and the leadership of that company walk out the door the instant they have the opportunity to do so. You've lost the intellectual property. Understand whether these people believe in the same things you do? Do you understand what will keep them in your business?


5) Conduct thorough due diligence.

The due diligence process is an essential part of M&A because it gives buyers a detailed understanding of:

  • the target company's capabilities

  • the product portfolio,

  • its financial health

  • business operations and;

  • contractual agreements.

This information helps buyers identify and mitigate risk and make informed decisions about whether or not to move forward with the acquisition at the agreed acquisition price. It also helps the acquiring company plan for and execute a smooth transition after the deal closes.


Financial: This involves reviewing the target company's financial statements and tax returns to get a clear picture of its financial health. This is also an opportunity to do a deep dive and validate the target's financial projections. It's also important to assess its debt load and future liabilities.


People: This involves assessing the skills and experience of the target company's employees and determining how they will fit into the buyer's organisation. It's also important to identify any potential cultural clashes during the integration process.


Legal: The legal due diligence process includes a review of all contracts and agreements and an assessment of any potential legal risks. It's essential to understand what you're getting into before signing on the dotted line.


Commercial: The commercial due diligence process involves a review of the target company's product portfolio, market position, competitive landscape, customers, sales channel and suppliers. Interviewing a meaningful subset of the target's customers (20-30) is essential for commercial due diligence. Interviewing customers gives deal teams critical competitive information, market data and insights into the quality and processes of the target. This information helps the buyer understand the company's strengths and weaknesses and assess its potential for future growth.


IT: The IT due diligence process is critical for any tech M&A deal process. It involves a review of the target company's systems, IT assets and infrastructure and an assessment of its cyber security risks. This information helps buyers understand the potential costs and risks associated with integrating the target company's IT systems into their own.


Technical: Another important area is tech DD. The tech workstream must audit the extensibility and modularity of the technology stack. Is the solution built in a way that will scale as the company grows? Stress testing is vital so you know if you'll encounter any issues when increasing the customer base of the acquired business.


Product: The product DD work stream should be focused on understanding the target company's product portfolio, value proposition. Identify the fit and integration opportunity with existing products and synergies with the acquirer's existing customers.


Developing thorough diligence processes can be daunting, but comprehensive diligence processes are essential to ensuring a successful tech M&A deal. By thoroughly reviewing the target company, buyers can avoid potential pitfalls, validate the acquisition price, and set themselves up for a smooth transition after the deal closes.


6) Don't leave integration planning until the end.

Pardon the irony that we've made integration planning point 6 of 7. Nonetheless, integration planning is essential and should be part of an M&A process from the outset.


Post-acquisition, it's crucial to have a solid plan for integrating the acquired asset, its team members and resources into your existing operations. This typically involves ensuring that everyone is on the same page regarding goals and priorities, as well as developing processes and procedures that will help streamline communication between different departments or remote teams. Be sure to consult with all stakeholders in this process, including senior leaders within the target business and their employees.

There are a few key things to keep in mind during integration planning:

  • First, assess your needs and priorities. Make sure you understand what the acquisition will bring to your business. Identify which areas are most important to you and any initial acquisition investments you need to make.

  • Map out the process. Work out how you will integrate the new company into your organisation, and identify the steps you'll need to take to make it happen. Don't let the integration process derail other internal initiates (unless it's imperative).

  • Communicate with employees. Keep your team updated (little and often) on what's happening during the integration process, and ensure they understand their roles and responsibilities.

  • Set up systems and processes. Ensure you have suitable systems and procedures to support the acquired asset and integrate them with your existing ones. Test process changes to ensure things don't break as a result - e.g. customer support, payroll etc.

  • Successfully manage expectations. Be realistic about what you can achieve during the integration process, and manage expectations accordingly. Set out a realistic timetable. M&A is usually additive to workloads. Therefore, define the critical factors of success and prioritise those integration tasks.

As your business becomes more acquisitive company-specific integration processes, integration phasing, and priorities will naturally develop, making it easier to manage each transaction successfully.


Communications Plan



A successful tech M&A deal requires a well-executed communications plan. This plan should include a strategy for announcing the acquisition to employees, customers, and the public. It should also include a plan for communicating with key stakeholders throughout the process.

Key stakeholders: There are several key stakeholders in any tech M&A deal, including shareholders, creditors, and employees. It's essential to keep these stakeholders informed of the process and what it means for them.


Employees: Employees are important stakeholders in any acquisition. M&A creates uncertainty and worry, and it is vital to successfully manage employee expectations with regular communications (little and often). They need to be kept informed of the process and what it means for their jobs.


Customers: Both the target's and the acquirer's existing customers need to be reassured that their service will not be interrupted during the acquisition. There may also be uncertainty about the potential changes. Communicate with them to minimise uncertainty.

Public: In some instances, the public needs to be kept informed of the acquisition to make informed decisions about their business dealings with the company.

You should design the communications plan to address the needs of all of these stakeholders. As a result, you can increase the chances of a successful tech M&A deal.


7. Measure success and learn.

No matter how much planning you do upfront, buying a tech business will likely come with unexpected challenges down the road. For example, it may take longer than expected to integrate new staff and processes into your business, or you may discover that product integration is more challenging than it first seemed.

Overall, if you want to successfully acquire a tech company and achieve your strategic goals, it's important to be realistic about the potential challenges that lie ahead and take steps to prepare for them. With careful planning, communication, and collaboration between all parties involved, you can increase your chances of M&A success in the world of technology.


In summary

As businesses become familiar with M&A, business processes and best practices specific to the acquirer will naturally emerge.

Effective deal-making takes practice and discipline. The guiding principles are that M&A transactions should align with a corporate strategy, not define it. As businesses become familiar with M&A, business processes and best practices specific to the acquirer will naturally emerge.

Effective deal-making takes practice and discipline. The guiding principles are that M&A transactions should align with a corporate strategy, not define it. In addition, each deal requires an investment plan that underwrites each acquisition is vital to maximising the success of each transaction.


About Lighthouse Advisory Partners

Our team of M&A experts has a wealth of experience with M&A transactions. We can help you with deal origination and develop an M&A pipeline that aligns with your corporate strategy. In addition, we can help you project manage the deal process, create an investment case, identify synergies and facilitate integration planning.


Our commercial due diligence solutions provide an X-ray view of the business so you can quickly identify risks and help you validate your investment plans. Contact us today to learn more.