To Plan B or not to Plan B?

by ExitAdvisor · 12th September 2016

Aquaa Partners conducted a survey of 1,345 CEOs of UK and EU tech companies to get their take on uncertainty in the markets and how well prepared they are for a market crash or crisis.

Extract:

– “Plan B” is for the “unexpected” crisis – when Plan A falls down and doesn’t work
– Plan A can fail for reasons outside one’s control. For example, in the 2008/2009 economic crisis, the share prices and valuations of most technology companies fell by 40% to 50% or more in only a few months
– Companies that did not have a “Plan B” suffered badly in this economic crisis
– It’s been 8 years now since the crisis and the world’s central banks have been fuelling the developed economies with QE…it is going to end sometime…and it is not going to end well…

Does It Matter to Private Companies If Valuations Drop by 40%-50%?

YES, valuation matters to a private company. If the market drops by, say, 50%, private company valuations will drop by ≥ 50% and affect the company in at least the following ways:

Management and Staff Share Options – if the value of share options declines then it will be more difficult to retain and potentially recruit staff

Capital Raising – if you need to raise capital, you could face a “down round”, which can introduce several layers of complexity and complications, or you might not be able to raise capital at all

JV / Share Deals – if your share currency declines and you can’t raise cash then you’re more restrained in being able to make strategic acquisitions

Exit – if the valuation of your company declines based on market conditions it will be difficult or impossible to execute an exit, and it will almost certainly be at a lower price

“Mood” – if your company valuation declines by 50% you likely to become depressed, which is not going to help grow your customer base or recruit / retain staff…

Watch the video below or download the PDF: Special Reports – Aquaa Partners

https://youtu.be/SWhuUkun_KM