M&A in the Channel: What Does the Post-COVID World Look Like?

… them with unique challenges?

UK-based technology and telecoms provider Radius Connect acquired three firms in late 2019: Pure Telecom, Radiance and Trinity Maxwell. Group managing director Ray Ferris believes there is always a challenge when valuing a business — particularly owner-operated businesses.

“That valuation can vary wildly from seller and buyer. It’s important that ongoing revenue and profit, with key staff costs retained, form the basis of that of that valuation. The current market means businesses are trying to cut costs to retain that level of profitability [from] that prior year’s budget forecast. But cutting costs doesn’t mean growth required post transaction can always be achieved; therefore, it’s perhaps better to take that short-term hit for longer-term gain.”

Elsewhere, Boomi’s Kiersey says the challenges to the channel are many. Correctly integrating data and technology stacks across resellers will be crucial to navigating them.

“Planning is key, with the need for businesses to merge at speed essential,” he said. “If a clear plan is missing, competitors will send out mixed messages via social channels — focusing on the internal disruption and lack of clear strategy.

“The ingestion of people, technology, processes, culture, and most importantly ‘business data,’ will determine the success of a merger, and this comes as a great opportunity but also a huge challenge.”

Integration

Indeed, integration appears to be central to any successful M&A strategy.

“Success is determined by the operational capability of the merged or buying company,” said Kiersey. “Without a correct integration process that unites tech stacks and the workforce, this is almost impossible. Channel operators need to be cognisant of this when embarking on M&A, to ensure that the finished outcome is as smooth as possible, and designed for the new business normal we are now in.”

In summary, Exclusive Networks’ Travers’ advises channel firms to “make sure you have a strong M&A strategy and team. Have a clear profile of potential targets. Focus on long-term value, not short-term valuation. Look for a cultural fit.

“And finally, ensure you have a robust integration process,” he said. “Remember, most companies don’t die of starvation, they die of indigestion.”