With all the news of monopolies and consolidations in tech, it’s a great time to look at the role mergers and acquisitions play in the industry.
In 2021, business spent $5.2 trillion on acquisitions. But we’re seeing that number contract. Global M&A volumes and values declined during the first half of 2023 (H1’23) by 9% and 39%, respectively, when compared to the first half of 2022 (H1’22) — dropping to $3.39 trillion in 2022. Overall global M&A value is down 44% in the first five months of 2023 — research shows we’re still under a trillion dollars.
For this edition of Insider Interviews, we’re joined by Scott Smyth, HG Insights EVP, Global Sales, who shares insights from his variegated experience in B2B SaaS.
Tell us a bit about your experience with M&A and where you see the B2B SaaS market today.
I’ve been on both ends of the equation, that’s to say I’ve both worked for companies that’ve been acquired and I’ve helped oversee acquisitions of B2B SaaS companies.
When the first company I worked for was acquired for a 7x revenue multiple, I quickly became excited about SaaS-based businesses and the enterprise value potential. So, six years later, I co-founded Pivotal iQ, a London-based company. Thanks to our explosive growth in the first 2 years, we were acquired by US-based HG Insights—where I am now the EVP, Global Sales.
Certainly in the last year, M&A has gotten a little bit damp and given the economy, I mean, the last big stat of 2021 was that $5.2 trillion was got spent on acquisitions. And that number keeps dropping.
Value of mergers and acquisition (M&A) transactions worldwide from 1985–2023
In this market, it’s important to continue to keep your eye on acquisitions when you’ve got capital and it’s more important than ever to do it astutely. And that’s exactly how Technology Intelligence helps a company to really choose the right acquisition to go.
And turn challenges into opportunities.
How does Technology Intelligence play a role in M&A? How does this fit into a B2B company’s growth playbook?
Across the board, Technology Intelligence has been crucial for successful M&A. It allows you to turn challenges into opportunities.
Technology Intelligence and market analysis are critical for being able to identify the areas you should be going into. It allows you to turn challenges into opportunities.
When you can understand what’s happening in your markets — trends, competitive displacement, complementary opportunities — it enables you to see what’s happening on a macroeconomic level. Technology Intelligence provides this, as well as on an account level, answering: What a company’s technology stack is, how much they’re spending on it, what’s happening with specific vendors, what your competitors are doing; and more.
And you might be left behind if you don’t consider all this in your acquisition decision-making. Otherwise, you may not be able to know whether they really are a good opportunity or a bad one.
PE firms use HG Technology Intelligence to help them with their deal sourcing and due diligence decision-making.
When you’re thinking about evaluating an acquisition, you need to understand not only who their customers are but what the rest of the landscape looks like how big their TAM is, what is their rate of customer acquisition vs. their competitors, their market share, etc. So Technology Intelligence is absolutely crucial to have.
Technology Intelligence helps you turn challenges into opportunities.
How popular are acquisitions in terms of growth strategy in B2B SaaS?
M&A has to be a part of a B2B company’s growth strategy. As a product-led company, it’s impossible to innovate fast enough to keep up with what goes on in our market, which is great for people who are using these tools because they get the benefit of it.
The companies that we’re closest to and we’re very complimentary in lots of ways have grown by acquisition. You have to think about it a few ways: Acquisition also plays a big part in product strategy considerations, but you also have to look at what kind of companies to acquire based on what your company strategy is.
What’s the decision-making process for acquisitions at HG Insights?
So, for full disclosure, I arrived at HG when my previous company PivotaliQ got acquired.
Now, when we’re evaluating an M&A deal, we try to consider whether an acquisition is going to diversify what we’re already doing. If it’s going to give us a new revenue line or perhaps more important, increase our TAM/SAM. Though there are many other important things as well — economies of scale, increasing our market share, increasing our productivity, etc.
Do you see more acquisitions happening in the B2B space in the near term?
We’ve been helping our customers grow at all costs since the beginning of HG Insights. Now, times are shifting toward efficient growth, so businesses have to be more self-sufficient and prioritize productivity, not chase higher valuations. We’re here to help customers achieve more with less by enabling them to make decisions predicated on the best data available.
We’re in a position now where capital is depressed and interest rates are high. There isn’t an incentive to buy or sell companies now. So I think things are slowing down in terms of M&A. But I think that by the end of this year, we’ll be coming out of that. Next year I think we’re going to see a big uptick in M&A because there’s a lot of build-up demand both on the buy and the sell side.
Data-driven decisions are always important, especially when it comes to mergers and acquisitions. We lean in to help our customers navigate their business challenges. HG’s Technology Intelligence is a resource to help our customers succeed. And in economic headwinds, we make sure customers succeed by getting creative with how we can give them more value for their investment.
It is more important than ever to rely on data-driven Technology Intelligence!
HG Insights: The Authority in Technology Intelligence
As pioneers of Technology Intelligence, HG Insights provides intelligence on 120 million installed technologies across more than 1.5 million global organizations and 32,000 IT software and services contracts. We have helped our customers optimize their business practices by improving the:
- Percentage of sales reps that met or exceeded quota in the prior year
- This can be further divided by account size, product, geography, etc.
- Average ramp time for AEs/SDRs
- Average deal size
- Expansion rates in existing accounts, which can be measured in different ways, such as geographic or product expansion
- Number of touches to book a meeting
- Number of touchpoints before an account is put into the pipeline as an opportunity
- Sales rep attrition rate
- Impact of HG Insights sourced accounts
HG Insights provides business decision-makers with Technology Intelligence so they can identify and prioritize their best prospects and opportunities. Contact us today to learn more about how we can help support you and your organization.