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Mergers and acquisitions for system integrators: Building, preparing and realizing value

By Clint Bundy posted 07-28-2015 12:56

  

This is the first in a three-part series on mergers and acquisitions topics addressing the control system integrator market.

Whether an owner will eventually sell a company or give it to children or management, it is advantageous for an owner to take steps to improve company value. The stronger the fundamentals of a company, the more options an owner will have going forward.

Here are some suggested ways that a system integrator can improve company value:

  • Talent. To bolster the services of a firm, owners should focus on hiring and retaining quality engineering and project management talent. The company’s talent bench should be deeper than just the owner.
  • Client markets. The client industries that a system integrator focuses on are a significant driver of an integrator’s success. Even with the best strategic plan and execution, an integrator can face restrictions should it service industries that are stagnant or in decline. Current examples of attractive, higher-growth markets include chemicals and petrochemicals, packaging and materials handling, and food and beverage. 
  • Diversification. In addition to addressing attractive client markets, it is important for a system integrator to service a significant number of clients. An integrator should aim for any single client generating no more than 20% of total integrator revenues for a given year. The fewer eggs in one basket for an integrator, the more value that a company can demand. 
  • Recurring revenue. While project-driven work is expected with most system integrators, buyers and financial investors place a heavy premium on long-term contracts and multi-year projects that demonstrate sustainable, recurring revenue. 

Other areas where a company can improve include financial reporting and strengthening its sales and marketing team. It is the goal of most businesses to plan and work toward maximizing their fullest potential and value. When that happens, the buyer’s market certainly recognizes and rewards those integrators who have solidified the fundamentals of success.

Read part two.

Clint Bundy is a managing director with Bundy Group, a boutique investment bank specializing in business sales, capital raises and acquisitions for the system integrator market. 

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