When a suitor comes courting, you need to impress.
A cursory glance in the mirror might not be enough.
To REALLY make an impact, you may have to look long and hard in order to fix your foibles.
So it is with mergers and acquisitions.
For many of the channel’s independent managed service providers, an ‘M’ or an ‘A’ can be the ‘exit’ reward for years of hard work building a successful business – or an opportunity-laden bigger platform upon which to continue to grow.
Whatever the circumstances, two things matter most when it comes to a valuation: a) your recurring revenue and b) how confident your suitor is that it will continue to recur and grow.
Only once those questions are answered can your ‘multiple’ value be calculated.
And, of course, THAT’S when a casual flirtation can turn life-changingly serious.
“A multiple is largely dependent on how reliable your revenue is, and your revenue is completely dependent on how strong your relationships are with your customers,” says Richard Thomas, Founder and CEO of UK Service Assurance disruptor Highlight, whose clever solutions can help pave the way for a successful M or A.
“If an organisation is on a strategic M&A pathway, or if it finds itself being eyed by a suitor in that way, it needs to be less obsessed by the numbers and more obsessed with its customer satisfaction levels.
“That’s what will impress most.”
To help in that regard, Highlight’s clever and affordable performance monitoring software presents – in an accessible and engaging way – a warts-and-all running commentary on all of the metrics that a customer holds dear.
And when you’re in an M&A situation, that kind of insight is like actual currency.
“A potential acquirer may want to talk to an organisation’s top three customers in order to get a feel for things,” says Thomas.
“How nervous would you feel if a potential acquirer asked you to set up those conversations today?
“Management teams can often lose touch with the daily reality and instead begin to believe their own marketing.
“Highlight helps an organisation have a strong conversation with its customers about how well or otherwise it is serving them. That kind of constructive honesty has high value on three counts”
“First it provides the organisation with a warts-and-all view of the service it provides to those customers, enabling it to identify and fix any issues.
“Secondly, if the quality of that service is high, it provides the organisation with complete confidence when sharing that view with a suitor.
“And thirdly, it can be offered to a suitor as part of any pre-M&A due diligence.”
Importantly, the critical data in question is normally siloed in organisations’ engineering departments: opaque, often impenetrable corners of a business rarely leveraged to their full potential.
Instead, Highlight harvests, interprets and makes relevant a myriad of KPI-related information and presents it via a single pane of glass to account managers and sales teams in a way which fuels precisely the kind of mutually-beneficial conversations that are the hallmarks of successful relationships.
Additionally, the ability to demonstrate to a would-be acquirer just how much an organisation values those relationships can represent a solid return on investment.
“Any organisation looking to sell is likely to have to kiss multiple frogs before it finds its prince,” says Thomas.
“Highlight enables a quick and easy demonstration of the key aspects of an organisation’s performance, whenever it is required, without consuming heavy management team resources each time you go through the process”
Timing is important too.
Mergers and acquisitions can take months – sometimes years – to trigger, nurture and complete.
Deploying a tool like Highlight now prepares the ground for any future interest.
“When an opportunity begins to develop, better to be on the front foot,” says Thomas.
“The market is seeing a significant uptick in M&A activity so if an organisation is on that path, it will pay to be fully prepared as soon as possible.”
Sounds like it might be time to start puckering up…
from UC Today https://ift.tt/3yEsfcO
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