A COVID-Exit: How to exit investments in times of unprecedented uncertainty


At times of high economic uncertainty, M&A activity can stall as buyers retreat to the sidelines, looking for bargains, while sellers are reluctant to ink a deal that may look cheap in a short while. 

COVID-19 created both unprecedented uncertainty and practical obstacles to dealmaking. Global lockdowns suddenly meant it was impossible to meet in person, develop relationships or to kick the tyres of a business and get a feel for its people, culture and operations. Despite all this, when the strategic rationale is strong and a target performs well, attractive exits can still be achieved.    

Here we share the details of navigating a software exit during a global pandemic.

Timing isn’t everything

AlbionVC led a Series A investment into Clear Review, the cloud-based continuous performance management and employee engagement software provider, in June 2019 and exited in October 2020 after a strategic acquisition by the Advanced, the UK’s third largest software company. The exit generated a 75% IRR and a significant return to our shareholders. 

How we became investors in Clear Review

We were first introduced to Clear Review’s CEO Stuart Hearn, former International HR Director for Sony and talent management consultancy head, in spring of 2019. Having been impressed by how much Stuart and the team had already achieved, we invested in the company three months later. 

We were excited to make the investment because Clear Review was right in our sweet spot. It had  a rapidly growing market and mission-driven founder who was surrounded by a great team with a shared vision. It was also selling an excellent B2B SaaS product that delighted customers. We led the Series A fundraising to enable the company’s next stage of growth, which included plans to accelerate product development, build out the US presence, and establish Clear Review as a leader in the UK market. 

Image credits: Albion

Working together produced growth

Since our initial investment, the company has more than doubled in size on nearly all fronts in terms of customers, revenue and number of employees. In addition, the company rapidly increased the average contract value (ACV) and started signing deals at over 10x the ACV from when we invested. 

Impressively, much of this growth took place during the pandemic – a time when anything not considered “mission critical” by software buyers was falling by the wayside. Clear Review’s retention rates, even during this tricky time, would be the envy of any SaaS business.

The operational performance was helped by the effectiveness of the senior leadership team, who joined following the Series A financing – including CFO, CRO, Director of Marketing  and Chairman. The expansion of the product suite from continuous performance management to employee engagement also enabled the company to win more customers and retain existing ones.

The pandemic triggered interest in the Clear Review business

While our original plan was to build the business over a five-year period and position it as a strategic target for one of several consolidators in the mid-market technology space, the pandemic had rapidly accelerated and refocused the HR technology sector thereby creating an opportunity for an attractive exit, much earlier than envisaged. 

With a significant proportion of the workforce having to work from home, a number of large technology providers to the mid-market recognised that they had gaps in their HR product portfolio, in particular in performance management and engagement, which they were keen to plug through an acquisition of a best-of-breed solution. This translated into a strategic valuation being agreed that was attractive to both the acquirer and the exiting shareholders.  

Gordon Wilson, CEO of Advanced comments “In light of Covid-19, Clear Review’s technology gives managers the tools to continuously develop and improve people’s performance remotely whilst being extremely complementary to their existing Human Capital Management solutions”. 

“Clear Review was recognised as a strategic asset and the approaches received from a wider set of suitors reflected this, allowing us to exit much earlier than originally envisaged comments Stuart Hearn, CEO of Clear Review.  The deal took three months to complete, from the time we first engaged in discussions with Advanced to the official close. This reflected Advanced’s significant experience of making acquisitions as well as its desire to integrate Clear Review into its existing HCM business quickly, so as to benefit from the very attractive cross-selling opportunities to its large customer base” concludes Stuart. 

Deal-doing creates its own challenges

The key challenge during the exit transaction was to ensure the business continued to run smoothly and execute its plans at pace while all the demands of due diligence and legal document negotiation were met. We addressed this by bringing in support from an experienced corporate finance specialist, as well as utilising the experience of the non-executive Chairman, who had significant deal-doing experience and became heavily involved.

We worked hard to ensure that key functional leaders were not distracted by the deal process but focus on continuing to scale the business. Regular communication with all key shareholder groups ensured any issues were resolved quickly and there were no surprises.      

Fundamentals still count

While the prospect of completing an exit during the pandemic may be daunting, we were pleasantly surprised by the strong interest from the well-established consolidators who were looking to tap into high growth areas despite all the uncertainties. 

Software and cloud players across the board have remained resilient during the pandemic, with many seeing their valuations and performance skyrocket. In the public markets, total cloud market cap had reached $1.7 trillion in October 2020 vs $690b in February 2019 (BVP index). As companies   across all sectors had to accelerate their digital transformations while embracing remote working environments, investor appetite for the right assets has remained strong. 

Navigating Clear Review’s exit has reinforced our commitment to back category-leading businesses and work with mission-driven founders who are able to combine strong product vision and assemble an excellent high-performing team. 

While the pandemic only accelerated market trends in Clear Review’s case, in the end it all comes down to the fundamentals – the market opportunity, the product and the team you’ve backed in the first place all determine the ultimate exit, or lack of.

by Emil Gigov, Partner at AlbionVC