What would potential buyers of your IT support / telecoms business be looking for? Where is the value?
Article updated 19th June 2023
Latest research shows that the number of businesses sold in the UK is at record levels. And even though there may be financial uncertainties, strong businesses continue to attract buyers.
The strength of the business’s sector is a key aspect for business buyers. IT support and telecoms businesses are in a strong market that will continue to grow.
Figures show that in the UK, IT services businesses turned over $83billion in 2022. Experts predict that there will be 7 per cent market growth in 2023. And telecoms businesses are also part of a growing market.
Analysts at Global Data say that the value of sales in the UK’s telecoms businesses topped $54billion in 2022. And they predict growth of more than 2 per cent in 2023.
Potential for growth is one of the main elements that attract buyers of businesses. It is clear, then, that IT support and telecoms businesses will tick that particular box.
What business buyers look for:
Buyers of almost any type of business are generally looking for the standard traits of a strong business, namely:
1. Potential for growth
2. A strong team that can manage the business day-to-day without the owner
3. Client relationships not dependent on the owner
4. Low dependency on a few top clients
5 .Good financial management systems in place
However there are several aspects of an ICT business that prospective buyers will look at closely:
1. Recurring contracted revenue vs. one-off sales for ad-hoc projects and equipment re-sales,
2. Duration of contracts: How long are clients tied into the business for?
3. Ability to transfer the client contracts to a new owner,
4. Pricing compared with the market.
The common theme here is client contracts. Whilst there will certainly be strategic reasons for acquiring your IT support or telecoms business, such as geographic location or the desire to add complimentary services to a group's operations, the no.1 attribute that buyers of ICT businesses are looking for is client service supply contracts which offer a secure, recurring revenue stream.
This is where the value of your ICT business lies.
Comparing two ICT companies of similar size,
1. Company A with a low proportion of contracted service revenue, a high proportion of equipment re-sale revenue, 30-day notice contracts, the client requirement to re-sign with a new owner on transfer of ownership and pricing below market average,
2. Company B with a high proportion of contracted service revenue, low proportion of equipment re-sale revenue, 12 months or more contracts with the ability to transfer contracts to a new owner and pricing above the market average,
The latter would be valued far higher. Sometimes the difference can be 2 or 3 times, but in most cases these points will make the difference between selling your business at your target price and not selling at all.
Where is the value in your IT support / telecoms business?
We would be delighted to offer you a free appraisal of your business to give you guidance on its value and attractiveness to buyers, and whether now is the right time for you to sell. Our appraisal can take the form of either a face-to-face meeting or a telephone call, as you prefer.
Please contact us on 020 8090 9380, email [email protected], or complete the form below to arrange an appropriate time to review your exit strategy and the value of your business in confidence and without obligation.
This article originally appeared as part of our series of e-Tutorials for the Sale of IT Support & Telecoms Companies.
