Category Archives for "Managed Services News"

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

‘Dark Clouds on the Horizon’ as European Channel M&A Continues

By | Managed Services News

The channel is consolidating at a fast rate, but the M&A landscape could soon change dramatically.

Economic trends in Europe indicate that private equity firms will likely offer lower multiples to prospective sellers.

So says John Holland, managing director of Corporate Finance Associates. Holland, whose investment banking firm advises midmarket businesses on M&A, said macroeconomic factors are depressing share prices even amongst the hottest technology companies. Thus, companies looking to sell their business shouldn’t be surprised if they receive lower valuations than what their peers reported getting last year.

Holland will participate in a session called “Channel M&A: Everything Today’s Leaders Need to Know,” alongside Total IT Technology Solutions’ Steve Dunmall and August Equity’s Mehul Patel. The session will happen at Channel Partners Europe, 14-15 June, in London.

In this preview, Holland shares insights with Channel Futures about trends impacting consolidation and private equity in Europe.

Channel Futures: How would you summarize the state of channel M&A in Europe? What trends are you seeing among both vendors and partners?

CFA's John Holland

CFA’s John Holland

John Holland: The volume and aggregate value of M&A transactions in Europe in 2021 were extraordinary. According to Pitchbook, the trend continued into [the first quarter of] 2022 with record volume and aggregate value. The robust demand for technology businesses with recurring revenues has elevated valuations to lofty levels as certain sectors have undergone rapid consolidation. However, there are dark clouds on the horizon.

Join 500+ MSPs, resellers and vendors at Channel Partners Europe, 14-15 June, in London. Part of London Tech Week, the event will feature 50+ channel leaders, innovators and experts. We’re expecting 1,500 attendees with whom you can discuss channel best practices and next-gen technology. Register now!

CF: Private equity is one of the most notable forces engaging in channel consolidation right now. What’s one important thing prospective sellers should know about these private equity firms?

JH: Debt is the fuel that propels acquisitions. The low interest rates of the past decade have driven a record volume of mergers and acquisitions. Private equity firms utilize leverage to acquire businesses. Leverage boosts the return on investment in ordinary macroeconomic scenarios. However, as the global economy faces extraordinarily high inflation, interest rates are rising dramatically worldwide, thereby elevating the cost of capital for private equity firms. Meanwhile, the risk of recession seems to be rising as higher fuel costs dampen economic activity. In this macroeconomic environment with higher risk of recession and higher interest rates, private equity firms are likely to adopt financial models with lower valuations. Business owners who are contemplating selling their businesses need to understand that the high multiples on EBITDA (earnings before interest, taxes, depreciation, and amortization) of the past will likely decline.

The public equities market for technology shares might be a harbinger for valuations of privately held technology services firms. Even hot cybersecurity and cloud technology companies like Crowdstrike, Zscaler, and Microsoft have depressed share prices now. In the European IT services area, major players like SoftwareOne, Computacenter and Softcat are way below their 52-week highs.

CF: What’s one key question a prospective seller should ask a prospective buyer, and vice versa?

JH: Sellers of businesses spend an enormous amount of time providing prospective acquirers with financial documents and other confidential details about the sellers’ businesses. Before providing any prospective acquirer with any information, a confidentiality agreement should be executed. Prospective sellers of businesses should ask prospective acquirers to demonstrate the financial capacity necessary for the acquisition. Also, it is important for the seller of a business to understand the goals of the acquirer, the potential synergy with the acquirer, the acquirer’s expectation for the role (if any) of the seller in the acquired business, and the acquirer’s plan (if any) to integrate the seller’s business into a larger entity. Sometimes acquisitions involve the seller rolling over equity into the acquirer’s business. Rolling over equity requires extensive due diligence on the acquirer’s business – just like in any other investment.

CF: Is there anything else you’d like to add?

JH: The best way for a business owner to maximize the value of his/her business on the sale of the business is to have an investment banker orchestrate a confidential auction-like process that pits prospective acquirers against each other. Negotiations between a business owner and a private equity firm are asymmetrical. That’s because private equity firms have teams of legal and financial advisers with years of experience in mergers and acquisitions. Sellers of businesses should level the field by seeking legal and financial guidance from experts.

Jun 02

Mobile Computing Sales Set to Recover This Year

By | Managed Services News

With the right headwinds, sales of mobile computing devices in the channel could return to growth by the second half of 2022.

Sales of mobile computing devices through distribution could return to growth by the second half of the year. However, that is dependent on supply issues easing and cost-of-living challenges having a reduced impact, according to research firm Context.

The figures come from Context’s new forecasting report which reveals that demand for mobile computing continues to drive the PC market. It expects this demand to remain high, especially among businesses. However, organizations are being more discerning about purchases, and economic and geopolitical uncertainty might hit consumer sales.

Availability and Demand

Supply and demand remains a key issue. There are more mobile computing products available than last year; European distributors are holding seven to nine weeks of stock. The problem, notes Context, is that it’s not always the right stock. Some products that have been in transit for many months are outdated by the time they arrive. Russia’s war in Ukraine and additional COVID lockdowns in Asia have also added to supply chain headaches and costs.

But there are some positives. Windows 11 migration will drive more PC sales in the second half of the year, as may an increased appetite for more sustainable and secure products.

With these factors in mind, Context has developed two forecasts for the next year.

It based the first on a pessimistic scenario. Here, supply improves but the disconnect between product availability and demand continues, desktop demand remains soft, and economic factors such as inflation hit consumer and commercial demand.

In this case, the company says mobile computing adoption could slide by nearly 22% once the numbers are counted in the second quarter. That decline could improve to just 1% in the third quarter, Context says. This then will return to low growth in the fourth quarter of 2022 and the first quarter of 2023. For desktop computers in this scenario, adoption would get worse from Q2 to Q3, declining by 5.6% and 6.9%, respectively, before rising again – albeit not to positive levels.

The second, more optimistic scenario, imagines improvements in supply and desktop demand. There could also be price drops, second-quarter excess stock selling out, and economic factors having a smaller impact. In this situation, mobile computing unit sales could go from a 7.1% decline in the second quarter to 10.9% growth in the third quarter. Then, sales would then stabilise in the fourth quarter and tail off in the first quarter of next year. Desktop sales would hover at a 2.3% decline in the second quarter and stay at a similar level (−2.7%) in the third quarter before becoming positive in the following two quarters.

 

Jun 02

No Organization Is Immune

By | Managed Services News

There is a staggering disparity between how well organizations believe they are protected against ransomware and the protection their existing security solutions actually provide.

The recent cyberattack on discount retailer The Works emphasizes the need for organizations of all sizes to invest in ransomware prevention measures.

Since sanctions were imposed on Russia following the Ukraine invasion, there has been a tremendous surge in cyberattacks aimed at all sectors of the economy. Sir Jeremy Fleming, director of GCHQ, the United Kingdom’s intelligence, cyber and security agency, has said the Russian regime is identifying institutions and businesses to bring down, and predicts the number of state-sponsored attacks will increase.

It is not just banks and similar high-profile organizations that need to review their cybersecurity, as evidenced by the attack on The Works: In this instance, cyber thieves targeted a business that sells books, stationery, craft supplies and toys.

Five of The Works outlets were temporarily closed after an unknown perpetrator gained unauthorized access to its systems, adversely impacting trade and business operations by creating till issues and forcing delays to store deliveries and online orders.

Forensic experts have been hired to investigate the data breach, and The Works has notified the Information Commissioner’s Office (ICO) of the incident.

There is a staggering disparity between how well organizations believe they are protected against ransomware and the protection that their existing security solutions actually provide.

This disparity has grown massively since the start of the pandemic. Indeed, Covid-19 triggered global cloud adoption, a huge increase in shadow IT and widespread remote working, leading to extensive new data protection challenges.

Thankfully, in the case of The Works, third-party systems secured the company’s most sensitive customer data, highlighting the need to engage external third-party providers for data security and backup.

While there is no 100% effective way to avoid being a ransomware victim, there are actions you can take to ensure your backup strategy will able you to recover effectively:

  • Air gap: Guarantee that the primary and backup storage systems are physically separated. Bad actors are unable to access backup data copies because of this physical break.
  • 3-2-1-1: The most recent best practice calls for three copies of data, two separate backup media, one offshore location to store backups online and an offsite location for backups offline–all air-gapped.
  • Backup data malware detection and removal: Ransomware frequently stays idle on a network for long periods of time before encrypting systems. This model ensures that the malware is present in all backup versions, making malware-free recovery impossible. It’s become critical to be able to detect and remove ransomware from backup data, and to have an isolated area where data can be restored.
  • Instant/rapid recovery flexibility: Long periods of downtime can be just as harmful as data loss. A backup strategy must allow users to quickly return to work by allowing temporary access to data, if necessary, with priority recovery of vital data if necessary.

There is no fail-proof technique to thwart cybercriminals and no means to get rid of ransomware. With the right cloud backup, however, you can ensure that your organization is not held hostage by ransomware demands.

For more information, contact Redstor.

This guest blog is part of a Channel Futures sponsorship.

>