Psychology is a key part of success in the marketplace conditions of today. Understanding what we know (really know) and what we don't, can make the difference between liquidity, and just being ‘stuck'. For example, M&A Forum currently has a number of mandates from legitimate buyers of IT sector companies. These buyers are actively looking for businesses they can add to their existing portfolio in order to continue growing, when organic growth is not sufficient or isn't there at all.
Here are a few descriptions of the kinds of businesses currently being sought by several active M&A Forum buyers:
- A growing, profitable $500M+ company seeks a Cisco Gold Partner with > $20M revenue for immediate acquisition. Strong Cisco technical expertise, and professional pre-sales consultation experience addressing enterprise-level commercial clients. Also seeking solid management that wants to stay, and a business possessing financial and back-end infrastructure systems and processes to efficiently manage the services business.
- A $70M+ technology management firm seeks IT Managed Services providers with >$4M revenue, EBITDA positive financial performance and growth potential of at least 15% annually. Prefer a Western US location and an independently-owned operation with a quality, entrepreneurial management team committed to managing and growing the firm for at least several years.
- A highly profitable SAP consulting firm seeks acquisition candidates with revenue in the range of $1M - $3M for an immediate opportunity to help accelerate growth beyond its current forecast of 40% over 2008. Targets should have expertise in SAP, Business Objects or Hyperion HFM serving the healthcare, manufacturing or energy sectors.
- U.S. based consulting firm wants to acquire multiple professional services firms in the Northeast, focused on ERP, software development and BI consulting. Ideal candidate is Oracle or SAP-focused with revenue in the range of $8M to $12M, >20 consultants, and operations serving mid-market and enterprise-level commercial accounts.
- Government integrator, in business for more than 20 years, seeks IT services and solutions firms for acquisition. Targets should have >$1M revenue, EBITDA of at least 10% and be headquartered in the U.S. Oracle and SAP consulting, and IT Managed Services businesses preferred.
- Established provider of Managed Services to the SMB marketplace seeks companies with services revenue in the range of $500K to $2M. Prefer a Managed Services provider, but this is not required. Must have an SMB customer focus and an owner willing to stay for at least a year. Areas of greatest interest include Denver, Chicago and Phoenix, but other cities will be considered.
- A business providing IT solutions to the retail sector seeks companies with revenue in the range of; $5M to $30M focused on SaaS, and network infrastructure services, with the ability to serve customers on-site. There is immediate opportunity for transactions in Texas, California, Virginia and the Southeast.
I recently spoke with a company that would be a great fit for one of these buyers. I asked what their expectations were as to the value of their company. Their expectations as expressed to me, were quite reasonable, and I knew that at least a couple of viable buyers were currently looking for a business just like theirs. Their reply was telling, "In this environment nobody is going to pay us what we are worth." Even though we have a ready, willing and able buyer, willing to pay fair value for the company - they cannot escape the psychology of the market that they interpret as "I can't get fair value, because the market is discounting everything".
They are speculating, or worse, guessing about things they know nothing about, and it is costing them. It is becoming clear that there is no certainty about values being higher tomorrow, than they are today. The conversation should be, "Are you a seller?" Answer. "Yes, if there is a buyer who will meet my price". This is what achieving liquidity, and being able to diversify out of the large investment in your business asset, is all about.
Our job is to understand the market for IT sector companies, the buyers and the sellers that might make for good matches. We don't run IT sector companies - we help find the right buyer and the right transaction. If the match is made - good things can happen for all concerned.
If the presumption is indulged that ‘It can't be true that my company is saleable today for fair value' and you fail to take the step in the direction of a solid buyer....then you make the "It can't be true..." a self-fulfilling prophecy. And, by the way - we will tell you if we don't think we can get fair value for your company today - and will discuss with you what is required to get positioned to receive fair value for your business asset. There are buyers waiting...