Shoot the Moon with Revenue Rocket

Private Equity Investing In IT Services Companies

Episode Summary

Revenue Rocket is seeing greater interest in private equity companies acquiring or investing in IT Services companies. In this episode, Mike discusses his experience with private equity and M&A as we move into 2020.

Episode Notes

We’ve noticed greater interest from private equity companies investing in or acquiring IT service providers with a strategic approach – not just a financial one. Leading with a strategic buy, followed by add-on acquisitions, Private Equity companies are building larger portfolios and expanding interests within specific target markets.

For sellers, there are good reasons to entertain an investment or an acquisition from a private equity buyer:

• An opportunity to fully exit your business
• Deal structures are prominently cash, with earn-outs or sell financed collared notes used to help warrant parts of the business that may pose additional risk

We are seeing Private Equity investing more heavily into:

• Managed Service Providers because of the reoccurring revenue bases. IT providers with low churn rates become solid investment vehicles for long term, buy-and-hold, strategies.
• Staffing companies
• Traditional project-based consultancies with cloud based solitons, targeting the enterprise. There is a need for client applications to be moved to the cloud
• DevOps and optimization of cloud infrastructure
• Custom Development companies

Private equity entities are structuring all/heavy cash deals which are beneficial if you are looking to exit your business to retire or move on. We call this a clean exit. If you’re considering an exit entertain a conversation with private equity. We can also guide you along your way to an exit of your business, we’ve been doing it for over 18 years.

Our forecast for M&A:

Most of the economists we have looked at say M&A will continue to be strong through 2020 even through the presidential election. We still expect there will still be plenty of private equity buyers in the market. We recommend entertaining these offers if you have the option.