Talking Deal Trends & Killers with CIBC’s Joe Timlin
October 19, 2020 | Jani Tsui
Joe Timlin knows what it takes to get a deal done and, on the flipside, has seen some of the issues that can cause one to collapse.
There is no doubt that 2020 is unlike any previous year with the impact of the global pandemic on the economy. But Joe also sees the opportunities.
“COVID-19 has been a bit of a tailwind for some companies in markets like networking, conferencing, medical imaging, healthcare delivery and these companies are ticking a lot of boxes for private equity who are eager to put money to work,” he says.
Another interesting trend is the increased interest from US venture capitalists.“There is very strong interest from US investors who historically may have invested in Silicon Valley but increasingly are looking for opportunities in Canada given the excellent higher education, and infrastructure, like banking and government support. Many American investors are eager to do deals.”
On the other hand, companies with declining revenues are struggling to raise capital and need to lengthen the runway to sale in order to get through the temporary decline. For those, controlling costs, seeking bank funding and accessing government programs can help to get through this challenging time and will be more attractive to investors as markets start to improve.
Whether a company is planning to raise capital in the near term for growth or is looking at a long-term exit strategy, preparation to maximize the probability of a good outcome and to avoid potholes along the way are part of the planning process.
“Every company is somewhere in the process of selling themselves in some way, whether it is issuing shares to bring in talent, selling a portion to raise money to grow, a large portion primary/secondary combination or 100% of it as a liquidity event and there is a lot that can be done, no matter what part of the cycle they are in,” says Joe.
There is foundational work that can be done today to prepare a company for sale and to ensure when it comes time to sell, mistakes aren’t made that either impair value or kill the deal. Some of the basics steps include:
- Make sure from day one everyone in the company signs an employment agreement that assigns the IP to the company. This should be a fundamental part of every employment contract and every person hired should sign one.
- Be diligent with keeping your share registry up to date starting day one. This level of detail is essential.
- Eliminate surprises such as outstanding employment grievances and lawsuits, patent/IP challenges. If these issues exist, disclose them early so the buyer is aware. Do not think for a minute these issues will resolve themselves in time to close and that disclosure is not necessary. Surprises kill deals.
- Invest in the right experts early on, like a securities lawyer and an auditor. In the earliest days, not when you are seeking capital or negotiating an exit. In my opinion and experience, this is money well spent.
- And lastly, have a business development mindset across the company from day one. Know your competitors and potential partners as well as you can. Seek interaction with them and their investors at conferences. Get feedback on deals lost and won from customers. Meet with investment bankers that cover your space, read the research. When you are seeking capital, the winners are able to clearly differentiate themselves from their competitors. And when you’re exiting, you will want to understand the buyer’s intentions, options and downstream economics in order to negotiate most effectively.
Joe is a Managing Director with Innovation Banking at CIBC. His group is part of the funding equation along with VC and PE for technology companies as they scale. Prior to CIBC, Joe spent 20 years as an early stage venture capitalist. His successful ventures include Bycast, QuIC, Make, and Layer 7. He has been a member of audit, compensation and M&A committees as a board member for more than 20 companies. He is married with 3 children, coaches soccer and field hockey, plays hockey and skies.
Join Joe and his panel who will share their “war stories” and perspectives on how to avoid deal killers. Register for TechExit.io West today.