During the past five years, IT ExchangeNet has seen an average of 60 percent cash at close and an average multiple of 6.33x adjusted EBITDA on traditional Microsoft businesses. High recurring revenue, focus on Azure, and reasonable customer concentration often drive multiples higher.

We analyzed other key factors aligning Microsoft partners to beat the average cash at close and trading multiples. Our team found companies doing so in the Microsoft ecosystem have niche specializations with strong demand, established market presence, innovative/proprietary solutions that integrate, and long-term customer relationships. Let’s look at how to use these value drivers inside your practice.

Strong customer relationships:

Cultivating strong customer relationships with clients and focusing on delivering your value and services is likely an internal goal of yours. As you develop/maintain a loyal and diversified customer base your company will become more attractive.

Buyers seek relationships along with contracts that will continue these relationships past the point of sale. The relationships and contracts that comprise this aspect of your business will help foster a recurring revenue model. The recurring revenue model is what makes SaaS businesses trade on multiples of revenue vs adjusted EBITDA.

We often see relationships and the contracts behind relationships stressed during a process when business has carried on through a single point of contact. If an owner holds most business development responsibility but wants to retire upon exit, it is essential to have contracts with current clients.

Specialization:

Specialization in high-demand services, such as Azure, cloud migrations, cybersecurity, or advanced data analytics, sets you apart from competitors and positions you as a market leader. Companies that demonstrate deep expertise in these critical areas can command premium valuations, as buyers often seek businesses that can offer specialized, high-margin services. Concentrating on these niche markets can lead to sustainable growth and a stronger foothold in the industry.

Specializations can also attract unique buyers who are seeking your specific niche, customer, or offering. Often a “perfect fit” business will see a premium attached to their offer.

Market:

A well-known brand with a solid reputation, proven track record, and robust client portfolio significantly enhances the perceived value of your business. Buyers are looking for companies with a recognized presence that can provide a stable revenue base and reduce post-acquisition risks. A strong market position indicates not only stability but also the potential for continued growth, making your business an appealing investment for buyers seeking a firm foothold in your specific sector.

Innovative/Proprietary Solutions with Integrated Capabilities:

Developing innovative or proprietary solutions, particularly those that integrate seamlessly with existing Microsoft technologies, can create a significant competitive advantage. These unique solutions enhance your value proposition by offering differentiated services that address specific customer needs more effectively. Businesses with proprietary tools or platforms that integrate well into broader IT environments are particularly attractive to buyers, as they provide opportunities for cross-selling, upselling, and expansion. By focusing on innovation and integration capabilities, you build a compelling narrative around growth potential and market differentiation.

Additional Point: The Power of Revenue Synergies

Revenue synergy potential is a powerful value enhancer during an acquisition. When a firm acquires a business, the ability to cross-integrate offerings into new markets and client bases can significantly expand revenue streams. Buyers often look for acquisition targets that complement their existing product or service lines, allowing them to introduce their own offerings to the newly acquired firm’s customers. At the same time, they can leverage the acquired company’s solutions to their existing clients. This two-way cross-selling creates multiple growth avenues, increases customer lifetime value, and maximizes the return on investment for the acquiring firm. A business with a well-defined, cross-sellable product or service portfolio is strategically valuable, making it a highly attractive target in the M&A landscape.

Conclusion:

Understanding these value drivers will position you and your company ahead of the market averages. If you are considering a sale or want to better understand how these value drivers can be implemented schedule a confidential meeting with our team today. Visit our calendar to find your meeting time.

Consider these tools to assist your utilization of value drivers:

Microsoft Learning Paths & Certifications
Microsoft’s Customer Success offering
Participate in Microsoft Events
Microsoft opportunities (ex. co-marketing, market development funds, and joint webinars)
Microsoft Incentive Programs (ex. Solution Assessments)
Advanced Specializations and Certifications
Azure Marketplace/AppSource

To learn more, visit the IAMCP Marketplace at IAMCP M&A Marketplace | IT ExchangeNet 

**Don’t forget to subscribe to our IAMCP Discussion Board!**

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