Moriarty said discussions with solid companies become much more difficult in a recession. On the flip side, he echoed DeWolfe's comments, noting that companies that need cash will sell at a depressed value. David Lawee, vice president of corporate development at Google, agreed that the valuation exercise becomes a lot harder because there is little or no visibility into future earnings for targets.
However, he said targets aren't necessarily cheaper because "there is a big difference between something being lower value and being cheaper. You need to have some sense of the intrinsic value." Of course, an acquirer of Google's stature is challenged with reconciling what a CEO thinks his startup is worth with what Google might think.
Google, Lawee stressed, is looking for companies with "breakout technologies," such as Android, which formed the basis for Google's mobile operating system, or Keyhole, which led to Google Earth.
Google is also looking for companies that have hit "escape velocity," such as YouTube. These companies, he said, didn't come cheap. Indeed, YouTube cost Google $1.65 billion. For more advice (and bearish comments on the market) from Lawee, please see this post on Google Watch.
Dan'l Lewin, corporate vice president of Microsoft, seems to face a great challenge.
In addition to the 12 or more billion-dollar businesses within Microsoft looking to make purchases, Microsoft has 800 computer programmers working to innovate in Microsoft's Research Lab. There is a gap between the developers and the business people where there are "build or buy analyses going on," Lewin said.
However, startups be warned: Lewin promised the economy won't force him to either shy away from buys that make sense for Microsoft's business. He added:
"The buy more and save model isn't going to work. The calls we get like everyone else here... 'it's available and it's available now and it's a good deal'... It's typically not a catch that we're going to make even though we may be looking."
What can startups take away from all of this advice? Don't sound desperate, because businesses are only going to buy you if it makes sense. Lewin said companies in this tough climate are attractive in solid climates, so the "shotgun approach" won't work immediately.
He asked VCs not to make nine different phone calls to people at Microsoft because the decisions all go through the same few people. Also, Lewin said companies seem destined to succeed or fail, regardless of the economic climate.
In short, there is no magic bullet, magic wand or magic anything VCs can do. If the fit is right, your client could get bought, lower valuation or not.
The panelists have much more to say, so check out the Webcast recording here. The panel is titled "Corporate Buyers: Where is the action for 2009?"