https://www.channelfutures.com/wp-content/themes/channelfutures_child/assets/images/logo/footer-new-logo.png
  • Home
  • Technologies
    • Back
    • Analytics
    • Artificial Intelligence
    • Cloud
    • Data Centers
    • Desktop
    • IoT
    • Mobility
    • Networking
    • Open Source
    • RMM/PSA
    • Security
    • Virtualization
    • Voice/Connectivity
  • Strategy
    • Back
    • Best Practices
    • Business Models
    • Channel 101
    • Channel Programs
    • Channel Research
    • Digital Transformation
    • Diversity & Inclusion
    • Leadership
    • Mergers and Acquisitions
    • Sales & Marketing
    • Specialty Practices
  • MSSP Insider
    • Back
    • Business of Security
    • Cloud and Edge
    • Endpoint
    • Network
    • People and Careers
    • Training and Policies
  • MSP 501
    • Back
    • 2021 MSP 501 Application
    • 2020 MSP 501 Rankings
    • 2020 Hot 101 Rankings
    • 2020 MSP 501 Report
  • Intelligence
    • Back
    • Our Sponsors
    • From the Industry
    • Content Resources
    • COVID-19 Partner Help
    • Galleries
    • Podcasts
    • Reports
    • Videos
    • Webinars
    • White Papers
  • EMEA
  • Awards
    • Back
    • Excellence in Digital Services
    • 2021 MSP 501
    • Top Gun 51
  • Events
    • Back
    • CP Conference & Expo
    • Channel Partners Evolution
    • Channel Evolution Europe
    • Channel Partners Event Coverage
    • Webinars
  • Channel Mentor
    • Back
    • Channel Market Intelligence
    • Channel Educational Series
Channel Futures
  • NEWSLETTER
  • Home
  • Technologies
    • Back
    • Analytics
    • Artificial Intelligence
    • Cloud
    • Data Centers
    • Desktop
    • IoT
    • Mobility
    • Networking
    • Open Source
    • RMM/PSA
    • Security
    • Virtualization
    • Voice/Connectivity
  • Strategy
    • Back
    • Best Practices
    • Business Models
    • Channel 101
    • Channel Programs
    • Channel Research
    • Digital Transformation
    • Diversity & Inclusion
    • Leadership
    • Mergers and Acquisitions
    • Sales & Marketing
    • Specialty Practices
  • MSSP Insider
    • Back
    • Business of Security
    • Cloud and Edge
    • Endpoint
    • Network
    • People and Careers
    • Training and Policies
  • MSP 501
    • Back
    • 2021 MSP 501 Application
    • 2020 MSP 501 Rankings
    • 2020 Hot 101 Rankings
    • 2020 MSP 501 Report
  • Intelligence
    • Back
    • Our Sponsors
    • From the Industry
    • Content Resources
    • COVID-19 Partner Help
    • Galleries
    • Podcasts
    • Reports
    • Videos
    • Webinars
    • White Papers
  • EMEA
  • Awards
    • Back
    • Excellence in Digital Services
    • 2021 MSP 501
    • Top Gun 51
  • Events
    • Back
    • CP Conference & Expo
    • Channel Partners Evolution
    • Channel Evolution Europe
    • Channel Partners Event Coverage
    • Webinars
  • Channel Mentor
    • Back
    • Channel Market Intelligence
    • Channel Educational Series
    • Newsletter
  • REGISTER
  • MSPs
  • VARs / SIs
  • Digital Service Providers
  • Cloud Service Providers
  • CHANNEL PARTNERS ONLINE
 Channel Futures

Strategy


To Buy  or Not to Buy  an IT Services Business

To Buy – or Not to Buy – an IT Services Business

  • Written by Khali Henderson
  • February 14, 2017
Many of the marketplace drivers behind your decision to buy are the same ones that drive sellers to sell, including consolidation, the need for greater scale and scope, and technology evolution.

Last month, we spent some time exploring a number of angles on selling your business – whether or not to sell, how to prep for sale, tips for increasing the value of your business, and a Q&A roundtable with three leading channel M&A attorneys on the current climate for shopping your VAR, MSP or Agent business.

This month we’ll dive into the buyer’s side of the transaction, or, in the case of this first entry, the potential buyer’s side of the transaction.

Unlike all the considerations on the seller’s side of the deal, which can range from financial and marketplace practicalities to factors in an entrepreneur’s personal life, the buyer’s side is more direct.

Either you want to build a bigger business for the long-haul or you want to build a bigger business before selling out (often for a higher multiple, but we’ll cover more on that later in the series).

Two Sides of the Same Coin

Many of the marketplace drivers behind your decision to buy are the same ones that drive sellers to sell – consolidation, the need for greater scale and scope, technology evolution, etc. 

They’re all the nuances, or depending on your disposition, nuisances, that make today’s market different from yesterday’s and vastly different from the one you entered years ago.

Similarly, most business owners – especially those who have never executed an acquisition – need to walk themselves through the same sanity checks as they would if they planned to sell.

Some considerations are practical:

  • Can I get the capital I need to make the deal?
  • Can I attract the talent I need to manage the integration and larger organization?

Some considerations are professional:

  • Am I as capable of running an organization as I am building one?
  • If not, is it in my personality to get out of my team’s way and not bottleneck and micromanage the company while I focus on other deals?
  • If my company is racking up significant organic growth, is it worth diverting energy toward an acquisition?

All considerations are personal, but some are especially so:

  • Does securing capital bring an unacceptable level of personal risk (e.g., requiring collateral, such as your home or other personal property, etc.)?
  • Do I even want to work in – even if it is sitting atop of – the more rigid and structured organization necessary for a successful integration?

These questions are not trivial and some (e.g., resources) are genuine hurdles, which is why you’re more likely than not to end up on the “sell” side of the buy/sell continuum.

When You Land on “Buy”

Let’s assume you are one of the few, the proud, the buying machines. Factors you should consider when laying out your strategy include those that expand strengths (especially scale) or shore up weaknesses (typically scope). Hopefully your transaction(s) can add a little – or a lot – of each.

Other factors to consider when identifying acquisition targets (beyond the obvious ones of gaining more revenue and expanded geographic reach) include the potential to:

  • Secure stronger supplier contracts
  • Gain leverage with current suppliers
  • Move up market
  • Move into profitable verticals
  • Acquire products to sell into your customers (perhaps also up market or in key verticals) and protect your customer base from other players pursuing a “one-stop shop”
  • Acquire technology that will, or perhaps already has begun to, replace your current product line
  • Gain some revenue before selling, ostensibly to obtain a higher value (maybe a full- or mini-rollup)
  • Acquire brand equity (this could literally be to acquire a better brand, but it also could be for the huge jump in stature and market presence that occurs when a fairly well established brand is acquired by one that is lesser-known)
  • Diversify revenues
  • Take out a problem competitor
  • Gain enough mass to compete with competitors that also are scaling up
  • Any of these – or combination of these – factors that simply let you stay in the game on an evolving playing field.

Process, Process, Process

We also could have called this section “Patience, Patience, Patience.” Assimilating another organization is no stroll through the park, and if you’ve been one of those gunslinger type of entrepreneur who shoots from your hip (or, more accurately, your gut), the long-term success of your transaction will require you to put those guns away.

In fact, if you’re that kind of entrepreneur, you’re probably better off out of the way — period.

Successful integration is a game of process – adding new processes where they don’t exist, mapping new and existing processes in detail, and creating a process for processing those processes into one process.

(Got that?)

And don’t forget processes for maintaining revenue generation. Buyers all-too-often focus too much on accounting and operations integration and not enough on maintaining the revenue-generation engines they acquired. While accounting is happily consolidating books and employee benefits plans, lead generation dwindles and sales pipelines decay.

Six months or a year down the road, frustration sets in and finger-pointing starts when sales activities are not meeting pre-deal projections.

A word for the wise on this kind of hiccup and related conflict: As the acquiring party, it’s your company now, so anything that’s neglected is ultimately your responsibility. This is why the half-hearted “let’s do this part for now and slow-walk the rest” approach so often fails.

In a new organization with new leadership, if confusion over responsibilities or a power vacuum emerges, then the “status quo” isn’t the “status quo,” it’s decay. So plan it out and get it right – on the top line as well as the bottom. 

The End Game

Over the next month we’ll dig into more detail on the acquisition process, some pitfalls to avoid that could make your acquisition unsuccessful and some discussions with executives and experts that are actively engaged in buying VARs, MSPs and agencies.

Hopefully we’ll give you some food for thought and maybe some insight that can help you play it right when it’s your turn at the acquisition table.  

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Strategy

Related


  • Job cuts
    Latest VMware Job Cuts Impact More Workers in California
    The layoffs will begin March 30.
  • Hottest Ticket in Town
    Channel Partners Virtual 2021 Is the Hottest Ticket in Town
    And that means any town, since it’s 100% online. Will you be there?
  • strong customer relationship
    Datto Partners with ThreatLocker for Secure MSP Business Operations
    MSPs have seen increased security risks for clients amid COVID-19.
  • Brexit
    Now That a Brexit Deal is Done, What's Next for the UK Channel?
    There's an Increased need for virtual services and video conferencing, and a focus on security moving forward.

Leave a comment Cancel reply

-or-

Log in with your Channel Futures account

Alternatively, post a comment by completing the form below:

Your email address will not be published. Required fields are marked *

Related Content

  • OneLogin Hires Juniper Networks Vet to Lead Accelerate Partner Program
  • Fortinet Vet Geoff Kreiling Departs for Deep Instinct
  • 3 Strategies for Selling Zero Trust in the Channel
  • BlackBerry Research: MSSPs Increasingly Targeted by Hacker-for-Hire Groups

Galleries

View all

From The Second City: How to Use Improv as a Business Tool

March 3, 2021

Industry Perspectives

View all

5 Ways XDR Can Improve Operational Efficiency for MSPs

March 4, 2021

Multi-Cloud: Strategy or Inevitable Outcome? (or both?)

March 3, 2021

Backup Vulnerability: 4 Targets Hackers Might Utilize to Infiltrate Your Backup Solution

March 2, 2021

Webinars

View all

A Partner’s Perspective on Channel Success in 2021

March 23, 2021

XDR and Why it Matters to MSPs

March 24, 2021

Top Security Trends Impacting Technology Security Providers In 2021

March 25, 2021

White Papers

View all

Why Fortinet for my MSSP?

March 2, 2021

Small and Mid-Size Business Security: 4 Steps to Success

March 2, 2021

How SMBs Can Secure Endpoints and Remote Workers for the Long Haul

March 2, 2021

Upcoming Events

View all

Channel Partners Conference & Expo

November 1, 2021 - November 4, 2021

Videos and Fastchats

View all

FASTCHAT: How SOAR Eliminates Security Challenges and Elevates Service Provider Revenues

January 6, 2021

Happy Holidays from Channel Partners & Channel Futures!

December 21, 2020

FASTCHAT: How Old, Unpatched Technologies Are Creating New Security Threats for MSPs and Their Customers

December 3, 2020

Twitter

ChannelFutures

Our latest #Cybersecurity Roundup highlights #CPVirtual, @Huntresslabs, @Entrust_Corp and @InsightEnt.… twitter.com/i/web/status/1…

March 5, 2021
ChannelFutures

RT @Channel_Expo: A HUGE thank you to our amazing #CPVirtual sponsors and exhibitors! 👏 @ATTBusiness @DellTech @8x8 @lumentechco @telarus @…

March 5, 2021
ChannelFutures

.@okta acquiring rival @auth0 in $6.5 billion all-stock transaction. #security dlvr.it/Rtzwdp https://t.co/4LvHCJuwsR

March 4, 2021
ChannelFutures

.@MicrosoftTeams features are coming to @MSFTDynamics365, the company announced at @MS_Ignite. #MicrosoftIgnite… twitter.com/i/web/status/1…

March 4, 2021
ChannelFutures

.@PreciselyData acquired by Clearlake Capital, @TAAssociates. #digitaltransformation dlvr.it/RtzbKg https://t.co/1rNYnTScxq

March 4, 2021
ChannelFutures

Thanks for attending #CPVirtual. Here's a Day 3 wrap and a look ahead to #CPExpo Homecoming in November!… twitter.com/i/web/status/1…

March 4, 2021
ChannelFutures

.@Veeam announces six annual Impact Partner Awards, with @SHI_Intl, @LogicalisUS, more. #cloud… twitter.com/i/web/status/1…

March 4, 2021
ChannelFutures

#XDR can improve operational efficiency for #MSPs. @TrendMicro #security #endpoint #AI #threatintelligence… twitter.com/i/web/status/1…

March 4, 2021

MSSP Insider

Newsletters and Updates

Sign up for The Channel Report, Channel Futures Update, MSP 501 Newsletter and more.

Live Channel Events

Get the latest information on the next industry-leading Channel Partners event.

Channel Partners Online

Want more? Find more channel news and analysis on our sister site, Channel Partners.

Media Kit And Advertising

Want to reach our audience? Access our media kit

DISCOVER MORE FROM INFORMA TECH

  • Channel Partners Online
  • Channel Partners Events
  • MSP 501
  • MSSP Insider
  • IoT World Today
  • Webhostingtalk

WORKING WITH US

  • Contact
  • About us
  • Advertise
  • Newsletter

FOLLOW Channel Futures ON SOCIAL

  • Privacy
  • CCPA: “Do Not Sell My Data”
  • Cookie Policy
  • Terms
Copyright © 2021 Informa PLC. Informa PLC is registered in England and Wales with company number 8860726 whose registered and Head office is 5 Howick Place, London, SW1P 1WG.
This website uses cookies, including third party ones, to allow for analysis of how people use our website in order to improve your experience and our services. By continuing to use our website, you agree to the use of such cookies. Click here for more information on our Cookie Policy and Privacy Policy.
X