Corporate finance can be a daunting prospect, so finding the right starting point is critical. When pursuing merger or acquisition activity, thorough research is vital.
Alan Riddoch, managing director, Agility Comms, explained, “Having made multiple acquisitions in our time, we’ve gained valuable insights into the process that some in the Channel, going through the same process, may find useful. Initial steps should always focus on rigorous research around the company that you’re looking to acquire, merge with, or be acquired by.
“Studying the teams and the individuals is crucial at this point. Any business should ensure the culture and values of both businesses are aligned, and the team itself is no better indicator of that. Especially if you plan on remaining in the business post-merger, sharing the same principles is essential for a prosperous and frictionless working relationship.”
Oliver Helm, CEO, Full Fibre, pointed out the options resellers and MSPs have when it comes to raising finance. He explained, “While there are many options – from crowd funding, bank loans through to investment or a partial sale to another MSP – the key is having the market data that proves your valuation.”
Helm put this into context using Full Fibre as an example. He explained, “A really good understanding of your network architecture, future build plans and critically your expected or planned customer base, means you can supply more market data for investors, which will be used to assess your future success.
“And, given that they’re very experienced in looking at a take curves, all of which are predicted, you need good facts and the evidence behind what’s driven your growth and informed your lofty future targets.”
Sound advice
Resellers and MSPs will often need external support to guide them through the process. Helm, from Full Fibre, discussed the importance of providing your advisors with the information they will need.
He said, “Advisors have great connections and can open big doors, with the insight and knowledge to help you pull together a very compelling business case, tailored to your preferred investor or acquiror – but it doesn’t come cheap or easy!
“It is not overnight, and they don’t know the business as well as you do so you will need to provide them all the data and statistics – and they will want the lot and some!
“The more understanding you have of the marketplace, your competition and potential customers the better, an advisor will steer you but the final pitch is likely to be by you and the investor needs to have the faith and belief in you and your data.”
Riddoch, from Agility Comms, added, “It’s essential that any merger or acquisition leans on the expertise of legal and financial advisors to ensure the process is being conducted properly and fairly.
“Legal advisors are key for guiding you and your team through due diligence, while finance and tax experts can advise on the legalities of the transaction and any tax liabilities for the company or an individual selling a shareholding.
Learnings
When asked what advice he would give to channel companies, Full Fibre’s Helm said, “The biggest lesson we learnt is that the right acquisition takes time! At Full Fibre, Axxeltrova supported us massively. Combined, we spent 1,000s of hours getting our investment bid right, to provide complete picture of our business and the UK marketplace.
“This placed us in the best position when acquiring offers. We then, along with Axxeltrova, focused our bid on the investor that we felt best fitted our build and business plans and aspirations, Basalt Infrastructure Partners and we couldn’t be happier with our new partners!”
Riddoch, from Agility Comms, also discussed his own experience navigating an acquisition process. He said, “The biggest lesson we learnt is that having your house in order will create a smoother process for everyone. Having all your documents stringently organised and ensuring policies are up to date, will help maintain momentum and reduce the chances of long delays.
“In Agility’s case, we conducted a compliance audit in the 12 months prior to acquisition to stay one step ahead and completely prepared for anything asked of us. We would also advise Channel companies to be prepared for delays.
“Mergers and acquisitions are long, complicated processes, but they’re something that needs to be done properly. Delays are sometimes necessary to ensure all bases are covered. So, add on a couple of weeks or months after the completion date, depending on the size or the complexity of the transaction, to prevent overpromising, and the added urgency increasing the risk of errors.”
This feature appeared in our December 2022 print issue. You can read the magazine in full here.