Adam Zoldan Consider the way customers and acquirers perceive your business BUSINESS BRIEFING PRINTITRESELLER.UK 35 Knight Corporate Finance is approaching its 18th year since inception and during that time we have completed nearly 250 deals across the technology spectrum. We have become pretty good at valuing businesses in our core sectors based on our deal history, current market trends and our knowledge of what acquirers are looking for. In the majority of cases, valuations are based on objective metrics: industry multiples, profit, cash generation, recurring revenue, growth etc etc. However the one measure that can be rather unpredictable is Perception – a subjective measure of what people think about your business. This can be based on any combination including branding, PR, the talent of the management team and market sector. Over the last few years we have worked on a few print deals and are generally impressed by the companies that we have met, however we have not been able to achieve the same market valuation that we see in the comms or MSP world. The usual reasoning is that managed print is a declining market but actually this may no longer be true. On the other hand the level of funding and investment in MSP’s remains extremely strong, even in todays volatile environment. This has been the case for some time now and the Telco guys picked this up and prepared for a pivot. Over the last 10 years virtually all of them have dropped their “telecoms” or “communications” suffix, and invested in either the acquisition or the recruitment of MSP expertise. Many, whilst retaining a high percentage of comms revenue now sit comfortably within the MSP peer group. Clearly any claims will have to be backed up with growth and actual deployment of services, but the point is that focus on changing perception was very clear and for many this has resulted in an elevated valuation. My view is that within any channel or reseller business, the Customer is the only asset of value. No customers equals no value and companies that have a sizable customer base and acquire new customers have high value. The Print sector has great customers; any customer looking to utilise high value print assets is likely to be at the upper end of the SME scale and their managed print provider is a trusted partner looking after a critical part of their business. However a similar size MSP with smaller customers on short term contracts may achieve a valuation of twice as much. The advice therefore has to be to consider the way customers and acquirers perceive your business. Xerox is having go, it acquired IT Savvy for $400m to “accelerate” Xerox’s transformation from a traditional print and document management company into a comprehensive technology solutions provider. Over the last 3 years, there have been just under 500 recorded M&A deals in IT services, just over 500 deals in Comms, but less than 50 deals in Print. It would be great to see this change over the next 3 years. www.knightcf.com
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