Eddie Harding of ICON Corporate Finance explains how they cast the net wide to land the big fish

What was the deal?

We advised on the sale of my-Channels to Software AG, which was completed in April 2012. The multiple achieved far exceeded management expectations, at more than 6x revenue. Nirvana, the company’s high-speed data messaging software, was widely recognised for its performance benefits and used by top-tier investment banks that accounted for 40% of all trades on the global FX market. Paul Brant and Eddie McDaid, who founded the business in 1999, wanted an acquirer that could take the software to the next level. They had 15 customers when they sold it; Software AG had 4,000.

Who were the advisers?

We were the lead advisers on the sale, and dealt directly with Software AG’s internal due diligence teams based in Darmstadt, near Frankfurt and Reston, Virginia. Bristows provided my-Channels management with legal advice, and Software AG used Blake Lapthorn.

What were the challenges?

Communicating the real value of a tech product is always tricky, and conveying its broader potential was particularly challenging. You have a good idea, but you can never know for sure why the ultimate acquirer will want to buy a business. We had interest from a wide range of parties and got that down to a shortlist of four. The my-Channels business was highly profitable, but also had a technology that competitors would try was to downplay the benefits of the product but, if that was the case, why were we still talking? One party we were in discussions with was a direct competitor to my-Channels. It doesn’t really matter how strong the non-disclosure agreement is, ultimately they are still the competition, and so you constantly have to be on your guard.

How was the deal structured?

The lion’s share of the consideration was paid in cash up front. A total of 15% was contingent upon achieving qualitative integration milestones over a three-year period, many of which they have already achieved. Less than 3% was performance based earnout. Software AG wanted management who stayed with the business to focus on the integration rather than just achieving their forecasts, which was compelling.

What was the key lesson?

Don’t just look for the obvious acquirers. Cast the net wider and look for complementary sectors to market the business to. We introduced the founders to a large number of potential acquirers beyond their immediate space. The offers from competitors were a lot tougher valuation-wise, whereas targets from neighbouring markets with a far more complementary fit offered us a "super premium" on the deal. Don’t give a price range to prospective buyers – always try to get them to give an indication. Set the bar too high you may lose some, too low you may miss out on a potentially better offer.

The career

Eddie Harding went to school at Glasgow Academy and graduated from Edinburgh University in 1992 with a degree in economics and accounting. He qualified as an ACA with Arthur Andersen in London, and was then seconded to their Sydney office for two years as corporate finance manager. After being promoted to senior manager in the private equity transactions team with a focus on technology and media, he joined ICON Corporate Finance.

Recent transactions

• Uniform Dating on £7m sale to Cupid Plc
• £3m MBO of Lanner Group financed by Northern Venture Managers
• Aria Networks $4m VC funding from Seraphim Capital and Capital for Enterprise