Mergers & Acquisitions expert Joel Cymberg on planning your exit strategy

Joel Cymberg is an expert in mergers and acquisitions who started out running adtech businesses over 20 years ago. Having founded, led and exited several of his own tech companies, these days Joel spends his time supporting exit-seeking founders in his role as Senior Vice President for Corum Mergers & Acquisitions. We caught up with Joel to find out when businesses should start thinking about their exit strategy, what the key trends in M&A are right now and if he’s worried about AI taking our jobs. 

Interview 

CUK: As somebody who has been both an entrepreneur and an advisor, what do you think are the most important qualities for business founders? 

JC: Oh, energy, positivity, a positive mental attitude… and hustle. And what I mean by hustle is the hunger and desire to get a deal done and to get things closed. And also, I think intellectually you need to be extremely open-minded and have a thirst to learn. When I meet younger entrepreneurs, the ones that want to understand everything are then able to manage people to do tasks they wouldn’t have known how to do before.  

And I also think we need to understand that entrepreneurs come in all different shapes and sizes, from all different backgrounds and with all different qualities. If you weren’t the six-foot four team captain and a leader at school, that doesn’t disqualify you to be a CEO. To be honest, most people aren’t like that. Having a personal touch and loads of energy and being able to connect with people is key, but I also see plenty of people who are introverted leading tech businesses. So, you might have some very bubbly, creative people leading businesses who don’t necessarily have perfect executive organizational skills; but what I’m saying is, entrepreneurs need to have some of these important qualities, but very few have all of them. And it shouldn’t deter you from having a go if you don’t tick every box. 

CUK: Do you think when founders are starting out that they should always have acquisition in the back of their minds? 

JC: Well, it depends on where you’re sat. When you set up a business you might do so because you want to pursue an idea or because you want that level of self-determination or maybe just have the kind of personality where working for people isn’t really what you like doing. So initially, when you decide to go into business, you don’t think about an exit. It’s not necessarily the driver. Who you are often determines why you do that. But if it’s quite premeditated – you’re looking for VC funding and you’re dealing with people who are going to require an exit because they’re in there to secure an investment on the other end, then absolutely. 

So at the start, no, but within the early stages, especially if you’re seeking third party funding, of course, you need to have an exit in mind.  

CUK: Are there particular things that founders ought to be doing in those early stages to make their businesses more attractive? 

JC: when I am engaging with businesses, I want to understand their key fundamentals. So, if somebody can explain to me what the core proposition of their business really is – understanding things like the margins, the churn, the deal size, the sales cycle, close rates, revenue growth – and can demonstrate to me that there’s a Moat or competitive advantage where if I invest in you, you’ve got some runway in front of you – that really means something to me. 

Cut back all of the trees; show me the wood. 

CUK: What are the major trends that you’re seeing in M&As at the moment?  

JC: What we’re seeing at the moment is a focus from investors on businesses that we would term as macro-resilient, in the sense that they’re bucking the current economic malaise. We’re talking about mature, stable, cash generative businesses; for example Govtech which relies on things like government contracts which don’t typically truncate or contract in a recession.

And, you know, in the negative parts of the cycle, one of the issues you might have – if we look at adtech and martech for example – is you might find that trading is tougher for new businesses in that space, as the agencies that oversee cash expenditure in these industries are going to focus on concentrating revenue with trading partners to maintain their own margins. 

We’re also seeing an awful lot of buying interest in 2023. The reason being is that 21 22 was arguably the end of a 13-year bull cycle at which point valuations and the reasons why you buy business tend to become a little bit less tangible. 

Too few people when they were purchasing companies were asking how am I going to pay this back? And the multiples a lot of companies were receiving were just based upon pure fantasy. Now one of the things we hear quite a lot is 2023 isn’t 2021. What that means is I have to justify why I’m buying this business, what the returns are and have a very, very strong and reasoned case. That wasn’t necessarily the case in ‘21.  

CUK: How are businesses responding to this set of market conditions and macro economic trends? 

JC: If you think Harry Styles gets fan mail you should see what’s happening with the M&A houses at the moment. Everybody that can’t raise VC money for series A is flooding in saying we want to sell our businesses; these types of businesses aren’t ready to sell. They don’t have the runway or they might not be a product market fit or be mature enough for exit. 

Selling your business isn’t a plan B if you really need to raise capital. And so, for startups in earlier stages, I think things could be a bit brighter. But for more mature businesses looking to do secondary raises or series A, I think they need the most assistance now.  

CUK: How do you see Creative UK Investment’s role in this environment?  

JC: Creative UK’s an interesting one; the kind of structures that you offer and the focus you have means that you would be a good and happy home, at a fair value for people wishing to raise money from you. But if you look at the wider VC market, they are asking for much lower valuations and my slight concern is I don’t think things are as helpful for startups and early-stage businesses in the current market. 

CUK: So, in terms of what business owners can do to make themselves more resilient, it sounds like you are saying it’s a case of going back to basics? 

JC: And that’s it. Really, in some ways it’s brilliant and common-sense returns. If you look at the past three economic cycles, when you get to the top of a market, investors suspend common sense and investors buy vision and things get a little bit fluffy. And when that fluffiness goes it’s a little bit more Darwinistic, but you’ve got to be able to say that I have a business, there is something in this and people have to believe your figures. So, we’re getting a return to sanity, we’re getting a return to normal metrics, and that’s a good thing because you know where you stand.  

CUK: So there’s maybe a bit less reliance on story? 

 JC: It is always about your story, and part of that story is showing us a business that has enough of a competitive advantage to grow in your environment. And that’s illustrated by case studies with clear metrics.

CUK: How have recent tax changes impacted companies that you’ve been working with?  

I tend to work with businesses globally, so it makes little difference to them. However, there is concern in the UK businesses I’m involved with. The concern is that increasing the tax burden, reducing tax credits and creating more red tape for businesses makes life extremely complicated. And startups don’t need any more complications.

One of the things I’m seeing with mature, profitable businesses is there’s a lot of interest on the buy-side. Businesses are a little bit cheaper. It’s not just that it used to be a seller’s market, it’s now fairer to the buyer. And, by the way, business owners are afraid of what the next change in the UK government will mean in terms of capital gains, so an exit this year and next would be more profitable. 

CUK: Lastly, as someone who built their name in adtech and martech, what is your take on the recent AI developments? 

The trend that I’m really seeing is these paradigm shifts with the withdrawal of cookies and the introduction of AI affecting both of these areas. And ultimately, you know, if you look at where the money to deploy in the market is, it’s that corporates have about a trillion to spend on acquisitions in terms of their war chests and whether they’re going to do it or not in an environment like this remains to be seen. 

If we have to pick the most significant trend that’s going to create an incredible paradigm shift in the way we do things, of course it’s going to be AI. But I think the first phase is one where we use it to support what we do better. I don’t really want to think what happens after that.