When the shareholders of an MSP are considering an exit, it is essential that they look for an advisor with whom they can quickly build a relationship based on mutual understanding, professional respect, and the ability to communicate throughout the sales process which can, at times, seem like a long and winding road.
Firstly, an advisor should gather information about the status and potential of the company before formulating an exit strategy for the shareholders. The strategy needs to identify all the options using the advisors’ industry expertise and experience and not simply value the business for immediate sale.
At Evolution Capital for instance, we lay out, in fine detail, a comprehensive view of all possibilities so that shareholders have options before them to ensure the best results.
Focus on the detail
Any advisor worth their salt should, before all else, offer a strategic review outlining a detailed discovery process including proposals for growth and the all the necessary financial performance metrics.
We ask for financial information from our prospective clients, analyse it carefully and then present back to the company with our recommendations.
A strategic review takes shareholders through all opportunities which might involve a trade sale as the best route to exit, or, alternatively, highlights options for growth leading to a more lucrative exit further down the line.
It goes without saying of course, that the best advisors will have secure relationships with suitable qualified buyers so that the best fit can be found for all parties and result in a conclusion in the shortest realistic timeframe.
Unlocking value
Shareholders, with the best will in the world, are often not entirely aware of all the processes involved in an exit and often need to lean on their advisor who should have a wealth of industry experience and market knowledge to help them through the process without losing focus on the goal.
With this kind of honest, open and committed relationship between shareholders and advisors, the process allows shareholders to communicate their true objectives so that the advisory team can seek to position transactions to achieve them and unlock hidden value along the way.
An advisor needs to equip shareholders thinking of an exit with all the tools that they require to make the right decision for them. It is a partnership which, if managed correctly, often leaves shareholders with an exit which exceeds their original expectations.
Strategy in action
Pescado’s recent acquisition by the Arrow Group represented the successful culmination of many years of hard work and a determined focus on growth by the company’s founders, Jonathan Weeks and Fraser Watson.
The idea of forming Pescado originally came after the two founders met during a management meeting at former employer, Iceland. They discovered they had complementary skillsets and believed there was a market opportunity for a new approach to mobile communications.
Watson and Weeks decided that they should embark together on a self-determining, entrepreneurial journey and Pescado was born.
In 2018, the founders considered an exit strategy and met with several advisors to independently verify the potential valuation of the business. At this point the company decided that the appointment of an expert advisor was a priority to identify all their existing options and build a strategy to exit the business.
The first part of the exercise was to start a strategic review which included a detailed discovery process with proposals for growth and all the necessary revenue metrics. The information was gathered, analysed and presented back to the company with recommendations.
The review highlighted all the available options and concluded by recommending a trade sale as being the best route for an exit. Pescado decided to progress this option and instructed Evolution Capital to begin the process of preparing the company for sale and finding suitable buyers.
The number of qualified buyers exceeded expectations and the sale progressed toward a successful conclusion. Pescado’s two founders are now a significant way through their earn-out period and are planning for the future.
When asked what their major takeaways from the sale were, both reiterated the necessity of remaining undistracted by the end-game and to engage with the best business advisors at the earliest opportunity.
This feature appeared in our June 2022 print issue. You can read the magazine in full here.