Print.IT Reseller - issue 88

01732 759725 40 M&A ...continued “What’s interesting in our space is that where businesses haven’t performed as well as before, it is largely because one-off projects or hardware/software sales have been held up, and that’s generally the smallest part of the value in a business. It’s the customer contracts, the recurring revenues that create the value and that pretty much continued throughout the pandemic,” he added. Building value In its focus on building value for clients, Evolution Capital is much more than just a broker between buyers and sellers of businesses. It is also an advisory firm that can guide clients through the process of building value whether they are looking for a sale in the next six months or not expecting to realise value for many years to come. The important thing, according to Cook, is to be prepared for any eventuality. “Business owners need to be ‘match fit’ for a sale at any point. A lot of firms that are growing through acquisition are approaching owners and asking for information and if you haven’t prepared your data, it is difficult to put your best foot forward. First impressions are obviously last impressions, and I do believe that owners need to have a good understanding of where the value is in their business and need to be able to respond to a buyer in a structured way.” An Evolution Capital business review should also provide clarity for business owners who might not have considered the different routes open to them. “In most approaches, an owner has some idea of their expectations from a sale, but they may not have considered all their objectives and the routes to achieving them. A business review will really define those objectives, which might be different for a family business with one founder/majority owner than for one with half a dozen owners, all of different ages, who might all have different expectations of what they want to achieve from a sale. Some may want to stay with the business, others might want to part-exit and retire.” Cook adds that failure to do the necessary groundwork in the preparation phase is another mistake commonly made by business owners. “There has to be a platform of data that carries you all the way through the process. A common mistake is to come up with a short form and to agree a price with the buyer and then, once you have signed a head of terms and the investigation starts to take place, being unable to support some of the statements you’ve made or the performance that you’ve outlined. That leads to an erosion of the price that was agreed. The biggest mistake is not preparing for due diligence and the breadth and depth of the investigation that takes place, particularly now that the PE firms are very specifically looking for sustainability in a business.” With 84 successfully completed deals, with a combined deal value of £602 million, Evolution Capital already has an enviable track record in the TMT space. The launch of e-Accelerator is an exciting new addition to its offering that will bring new efficiencies and opportunities for its 200 plus clients, as they look to enhance their business value. For Cook, the future is clear. “We will continue to offer premium services to the mid-market. We have new methodologies and processes, which we have developed over the last 12 months, and we will use technology to supplement face to face activity, which has been fundamental to our process for the last 20 years, with interaction through the cloud and through e-Accelerator.” www.evolutioncapital.com TMT sector is another benefit, as changes businesses have made over the last 20 years have helped to make this a highly attractive sector for investors. “PE clients and other investors clearly like the business model. The TMT space has changed dramatically over the last 20 years. Twenty years ago perhaps 30-40 per cent of revenue would have been recurring revenue, because then a business, regardless of whether it was in telecoms, IT hardware or software, would be about selling systems that were hung on the wall, wiring the office and maintaining that network. Today, services are cloud-based and revenues are generated through connectivity to the cloud or the software you are accessing or the storage you are using. It is quite typical for fast growing, high value IT businesses to have a recurring revenue of 80-90%.” This, Cook points out, is where the value in a business resides. “In the last 18 months, very few businesses have performed as they did in the couple of years running up to the pandemic. Some have performed much better – those that were providing remote services – while others that were providing hardware and project installations have struggled to fulfil orders. A lot of firms that are growing through acquisition are approaching owners and asking for information and if you haven’t prepared your data, it is difficult to put your best foot forward