The Company
In February 2020, Hornblower took on the sale mandate for Encodian; a fast-growing Microsoft Independent Software Vendor (ISV) Partner. The company specialised in providing Software, ‘SaaS’ and Consulting Services for Microsoft 365 Information Management and Digital Transformation Solutions to an expanding customer base.
Over a short period of 4 years, Encodian had successfully transitioned from a technology services business to an Independent Software Vendor (ISV) providing services around their proprietary software products. As an entirely self-funded entity, the company had successfully established itself as a profitable and focused Microsoft ISV and Services partner, delivering document, record and information management products and solutions connected to Azure and Microsoft 365 platforms.
The company had built a stable and growing customer base with a key focus on the healthcare sector as well as local and regional government authorities. Having identified the inherent difficulties in marketing and selling new solutions to UK government entities and healthcare organisations, Encodian had developed and deployed solutions, attaining excellent references and easing the route to scaling software sales in these key markets.
Leading with deep technological expertise in the prominent business software solution, Microsoft 365, Encodian had developed a niche in the collaborative services; SharePoint, Teams and the Power Platform (PowerAutomate, PowerApps and Power BI). The company delivered services for its customers in 4 key areas of Collaboration, Compliance, Automation and Security.
Encodian had also deployed a range of key proprietary software products alongside its service offering. The ‘EDRM for SharePoint, Teams and Office 365’ and SharePoint on-premise was designed to plug the functional limitations of the Microsoft 365 platforms standard document and records management features, ‘Encodian for Microsoft Power Automate’ actions provided enterprise grade and simple to use features for adding powerful and fast document format conversion, document clean-up, document security, OCR and many more (46 actions to date). The Encodian PDF Converter enabled users to convert or merge multiple files into PDF documents, optionally adding Encryption, Watermarks and OCR. This product utilised the company’s native cloud document format conversion service.
The company’s web presence had grown 370% in the previous 12-month period, with the rate of growth accelerating.
The Situation
The vendors and founders had developed the business to the point that, to realise the full growth potential in a shorter timescale, they would benefit from using the leverage from the infrastructure and business development resources of a larger company. They were however committed to not only supporting a full handover but also to staying within the business in the medium to long term following a successful acquisition.
The onset and fallout from the Covid-19 pandemic generated a notable increase in services and software demand, to the further advantage of the company’s prospects for sale. The vendors entered the business sales market in an advantageous position, due to the company’s strong presence in healthcare and other public sector organisations. Encodian’s service offering also demonstrated resilience to the resultant economic challenges which played out in early 2020, directly benefitting from the prioritisation of digital transformation initiatives required to enable effective home working and more efficient office operations.
The Outcome
As a company experiencing significant growth, accelerated further by demands generated by Covid-19, it was imperative to find an acquirer with the background and resources to scale the business to the next level. Encodian required a player with the ability to equip the business infrastructurally to support scale in the form of the right operational structures such as HR, Finance and Customer Relationship Management.
As it stood, the company operated through a technically skilled and efficient team consisting of the two founders, a Solutions Architect and three developers, two of whom were recently recruited to help deliver committed and forecasted activity. Whilst the two founders primarily led the delivery of activity, they were both seasoned solution architects with strong development skills providing both leadership and technical support for the wider team.
As both founders wished to remain with the company, the emphasis lay in finding a potential acquirer seasoned in the tech sector, with the resources to deliver the mechanics of scale and willing to make a partial acquisition.
We approached a select number of interested parties through our extensive database of investment contacts and the vendors received a highly beneficial offer from a private investor with a background in the tech sector. The acquirer recognised the value of the vendors’ expertise remaining in the business and agreed to acquire 60% of Encodian’s share capital, enabling the two vendors to retain the remaining 40% in the business at 20% each. This approach presents a win-win situation for the future of Encodian, with an acquirer who wishes to drive the business to further growth alongside founders incentivised by their retained interest in a highly promising business poised to increase in value in the years to come.
The deal was led throughout and completed by our International M&A Director and Business Sales & Acquisitions Consultant Mark Sykes.
SOLD – August 2020
James Sales, one of the founding directors of Encodian Solutions said “I was delighted with the way the transaction proceeded and Hornblower really ensured that the process was kept on track and that we realized our goals. We used TaxAssist to advise us, especially on the tax aspects of the transaction and we were very pleased with their support”.
Richard Parkin of TaxAssist said that “Hornblower were excellent throughout the process and really looked after our client. Their depth of experience and attention to detail during the process really counted. We would recommend them to the franchise as an excellent choice for business sales and acquisitions”.
