How long does it take to create a steady flow of
acquisition targets?
Strategic Ventures tracks and communicates with most
successful enterprise application consulting companies.
Therefore, after the completion of the Strategic Search
Plan, we can start identifying qualified acquisition
targets in a matter of weeks.
What are the usual profiles of these acquisition targets?
They
are usually established enterprise consultancies focused
on implementing application technologies from companies
such as: SAP, Oracle, Peoplesoft (Oracle), IBM,
Microsoft, Seibel (SAP), Hyperion (Oracle), Business
Objects (SAP) and Cognos (IBM).
What are the valuation
multiples for these acquisition targets?
The
answer to this question depends on many factors.
Valuations are influenced by the overall business
environment and the delivery model of the
enterprise applications consultancy.
Additional valuation factors include their; technology
partner relationships, industry focus, growth track
record, average billing rate, gross profit margins,
utilization rates, trailing EBITDA, geographic
footprint, customer profile, revenue concentration
risks, litigation risks and valuations of similar
recently acquired consultancies.
Is it currently a
“sellers” or “buyers” market?
Within the enterprise applications consultancy sector it
is often both a “sellers” and “buyers” market at the
same time. Valuations of various enterprise application
consultancies are often tied to a specific technology
which may or may not be in hot in the marketplace at
this time. For example, shortly after the recent
sub-prime turmoil, overall valuations for many
enterprise consulting companies dropped. However,
valuations stayed strong for consultancies focused on
business transformation-oriented projects involving
re-implementations of SAP and Oracle applications within
the Global 2000.
What are the typical “deal
terms” of acquired enterprise application consultancies?
In
most cases 50% - 75% of the deal consideration is paid
to the consultancy at closing and the balance is paid
out through an earn-out arrangement of one to three
years. Because a consultancy’s main assets walk out the
door at the end of every work day, these earn-out
arrangements help reassure buyers that the acquired
consulting team will remain intact after the merger.
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