XChange EMEA day 2: M&A in the channel, AI to the rescue and the importance of a Plan B

The second day of XChange EMEA delivered key business insights as well as some existential questions around AI and strategy

XChange EMEA day 2: M&A in the channel, AI to the rescue and the importance of a Plan B

The second day of XChange EMEA 2024 covered the gamut from picking the right private equity buyer to succession planning post-acquisition, to ensuring sustainability in the supply chain and more.

Attendees engaged with cybersecurity-focused presentations from Cisco and Kaseya and took part in boardroom sessions full of lively discussions with their peers.

M&A in the channel

The first keynote of day two focused on the accelerating acquisition dynamics in the channel and how channel businesses can ensure they pick the right PE buyer and ensure a smooth business transition.

"Financial investors, especially private equity funds, are some of the most active buyers in the IT services sector, often preferring businesses with recurring revenues and diversified client bases," Julian Riedlbauer, partner at M&A consultancy Drake Star Partners told attendees at the conference, outlining some key differences between acquisitions by other channel firms versus private equity.

"Strategic buyers look for acquisitions that enhance their offerings or provide access to new clients and markets, while private equity investors focus on building value over a set investment period before exiting," he added.

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Julian Riedlbauer, XChange EMEA Day 2

These included access to the PE investor's network, the potential domain expertise of a specialist PE house, and the varying cycles – three, five or seven years - on which private equity typically expects to increase the value of a business before reselling to another investor.

These can provide a business with a lot of flexibility in comparison to an acquisition by an industry buyer, the audience heard. But picking the right PE firm, with an appropriate network of contacts, a buying cycle that matches the founder or owner's preferred timeframe and an overall cultural match, is crucial, according to Riedlbauer.

"Running a structured M&A process and engaging multiple buyers can help you achieve the highest possible price for your business by creating competitive tension among bidders," he explained, while reassuring audiences that IT and services businesses especially are considered valuable by PE, due to the relative stability of the business.

"IT services and MSPs are highly attractive to buyers due to their stability, industry size, and recurring revenue streams, which are highly valued in M&A transactions."

Riedlbauer reassured the audience that, even though the economy is going through a period of volatility, the acquisition landscape in IT remains vibrant and there are usually several potential buyers to choose from should a business owner choose to go the private equity route.

"Last year, the IT services segment saw nearly 1,800 M&A transactions, underscoring the sector's dynamic activity and growth potential driven by trends like hybrid and multi-cloud, cybersecurity, and AI, he said.

"To achieve the best sale price for your business, it's essential to engage multiple potential buyers, creating competition and leveraging an M&A advisor to navigate the complex process and maximize value."

Read on for insights on AI and automation from Transputec CEO Sonny Sehgal and a recap of the final keynote of the day, presented by Olympic gold medallist Maarten van der Weijden...