• M&A is a critical growth strategy for top quartile companies, helping them expand market share, add capabilities, and grow geographically.
• Corporate development functions often lack the specialized skills and resources required to effectively execute M&A, making an outsourced advisor like Revenue Rocket valuable.
• An M&A advisor can provide objectivity, expertise, and a Dutch uncle role to help guide both the buyer and seller through the complex M&A process.
• M&A advisors do not have a pre-packaged list of deals, but rather tailor their research and outreach to each client's unique needs and ideal acquisition targets.
• The post-merger integration phase is critical, and an M&A advisor can help ensure a smooth transition by providing an objective, expert perspective.
• Outsourcing corporate development to an M&A advisor is typically more cost-effective than building an internal function, with a potential 5x savings.
• Without an experienced M&A advisor, companies risk common pitfalls like failing to meet expected shareholder value and not dedicating enough time to the acquisition strategy.
• The tech services sector is expected to see continued M&A activity in 2025, presenting opportunities for both buyers and sellers.
• Revenue Rocket has 25 years of experience in the tech services M&A space and is well-positioned to help clients navigate this active market.
• Listeners are encouraged to reach out to Revenue Rocket with any questions about M&A or growth strategy.

RELATED EPISODES

• Episode 202: Leveraging Quality of Earnings Reports in M&A Transactions. Listen now >>
• Episode 190: Buying a Business is not like Buying a Car. Listen now >>
• Episode 84: Why Inorganic Growth is Never off the Table. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

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• Independent sponsors are individuals looking to invest in or acquire their first company, often using outside financing.
• Independent sponsors differ from private equity funds in that they need to secure funding after finding a deal, whereas PE funds have pre-committed capital.
• Sellers need to carefully evaluate an independent sponsor's ability to raise the necessary funding to complete a deal.
• Independent sponsors may offer higher enterprise values than other buyers, but the deal closing is less certain.
• Independent sponsors should have a strong strategic, cultural, and financial story to present to sellers.
• Independent sponsors should line up multiple potential funding sources to mitigate the risk of a single source falling through.
• Sellers can sometimes negotiate shorter exclusivity periods in LOIs with independent sponsors.
• Advisors like Revenue Rocket can help sellers evaluate and qualify independent sponsors to improve the chances of a successful transaction.
• Independent sponsors can be a good option for sellers, but the process requires careful consideration of the risks and benefits.

RELATED EPISODES

Episode 173: Why is selling a Business so Hard? Listen now >>

Episode 161: Importance of Determining ROI on an M&A Investment. Listen now >>

Episode 97: Understanding Search Funds as an IT Services Seller. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

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Mike, Ryan and Matt from Revenue Rocket discussed the importance of a quality of earnings (QOE) report for IT services firms in the context of M&A transactions, highlighting that it is a comprehensive financial analysis that can provide third-party validation and help streamline the acquisition process. They also explored the benefits of Revenue Rocket offering QOE services as an independent tool to gain market visibility and access to potential buyers and sellers.

Quality of Earnings (QOE) report is a detailed financial analysis that certifies the accuracy and quality of a company's earnings and cash flows.

QOE reports are commonly used in M&A transactions, either by buyers to validate the target's financials or by sellers to prepare for a sale.

QOE reports are typically paid for by the buyer or financial sponsor, but sellers may also obtain one preemptively.

QOE reports are not regulated, but should be conducted by reputable providers with industry expertise, financial analysis skills, and the right tools.

Transparency and preparedness are key for sellers undergoing a QOE, as it allows the provider to efficiently complete the analysis.

QOE is a component of the broader financial due diligence process, which also includes reviewing the company's systems, processes, and other financial metrics.

Having a credible, independent QOE report can help sellers prepare for and accelerate the sale process.

For buyers, a QOE report provides confidence in the target's financials and can uncover potential issues or risks.

Revenue Rocket can provide QOE services to both buyers and sellers, but must maintain independence if involved in the transaction.

Offering QOE services can also be a business development opportunity for Revenue Rocket to gain visibility and potentially lead to other engagements.

Listen to Shoot the Moon on Apple Podcasts or Spotify.

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This episode discusses the challenges and strategies for re-entering the market after a deal doesn't close. Key points include understanding why the deal failed, whether due to strategic, cultural, or financial issues. Emphasis is placed on maintaining business operations and maintaining a positive outlook. Advisors can help by revisiting previous suitors and ensuring transparency about the deal's failure. It's crucial to reset expectations, especially regarding valuation, which may change based on current financial performance. The importance of working with experienced advisors and maintaining a fresh perspective is highlighted, along with the need to manage deal fatigue and maintain business continuity.

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• Convertible notes provide sellers flexibility to participate in upside if the business performs well, while also offering some downside protection.
• Convertible notes involve a seller providing a loan to the buyer, with the option to convert the remaining balance to equity at a future trigger point.
• The conversion trigger is typically a date or milestone, after which the seller can choose to convert the note to equity rather than receive the remaining cash payout.
• Convertible notes are commonly used in IT services M&A to allow sellers to "have a second bite at the apple" if the combined business grows significantly.
• Thorough due diligence on the buyer's financial stability and growth plans is critical for sellers considering a convertible note.
• Dilution from multiple acquisitions is generally not a major concern with convertible notes, as the structure can be designed to minimize impact.
• Key negotiable terms for convertible notes include interest rate, payment schedule, and conversion triggers/parameters.
• Sellers should seek legal and M&A advisory expertise when structuring convertible notes to ensure favorable terms.
• The main benefits of convertible notes for sellers are reduced upfront risk and the ability to participate in future upside.

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket. 

In this episode, we're talking about keeping the spark alive in an M&A deal and strategies for avoiding burnout.

Key points discussed in this episode:

• Deal fatigue is common in M&A transactions due to the numerous decisions and interdependencies involved.
• Advisors can help buyers and sellers avoid deal fatigue by setting expectations, managing timelines, and providing guidance.
• Patience is crucial, especially for buyers, as the M&A process can take up to a year to complete.
• Regular status updates and clear communication among all stakeholders help maintain motivation and engagement.
• Sellers may feel overwhelmed by the due diligence process, but should focus on responding effectively and keeping the business running.
• Unscrupulous buyers may attempt to "retrade" the deal at the last minute, which sellers can defend against with the help of advisors.
• Funding sources and approvals should be secured early in the process to avoid delays and frustration.
• Buyers who are too slow in decision-making risk losing opportunities to other interested parties.
• Maintaining a positive attitude and leaning on a strong support network can help both buyers and sellers navigate the M&A process.

RELATED EPISODES:

• Episode 195: Win/Win vs. Win/Lose Dynamics in M&A Negotiations. Listen now >>
• Episode 173: Why is Selling a Business so Hard? Listen now >>
• Episode 127: The Critical Pillars to M&A Success. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

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Mike Harvath, Matt Lockhart, and Ryan Barnett discuss the importance of taking breaks for business leaders. They emphasize that stepping away from daily operations can provide new perspectives, enhance creativity, and improve decision-making. Mike shares his personal experience of recharging during a holiday, which led to better problem-solving and leadership. Matt highlights the benefits of silent retreats for mental and spiritual refreshment. They agree that hobbies and different environments can foster creative thinking and better strategic decisions. Ryan concludes that time away allows leaders to trust their teams, enhances leadership, and contributes to overall well-being and effective business management.

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Here are a few questions we dive into to help frame up this discussion.

• What role does a sense of urgency play in driving growth within IT services firms, and how can leaders cultivate this urgency without creating chaos?
• How do you differentiate between a healthy sense of urgency and the detrimental effects of being in a rush when executing strategic initiatives?
• What are some common pitfalls that IT service firms encounter when they confuse urgency with haste in their growth strategies?
• Can you share an example where moving too quickly hindered the success of a business transformation, and what could have been done differently?
• How do you ensure that the urgency to implement change doesn’t compromise long-term strategic goals and quality execution?
• What key indicators help you determine when the urgency around a decision is justified versus when the team needs to slow down and think more critically?
• In your experience, what leadership qualities are most important when navigating the balance between urgency and careful, strategic growth?
• What advice would you give to IT services firms looking to maintain a sense of urgency while avoiding burnout and poor decision-making?

RELATED EPISODES:

Episode 122: Don't Make the $100k Sales Person Mistake. Listen now >>

Episode 162: Aligning Leadership in M&A for a Better Deal Outcome. Listen now >>

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Mike Harvath, Matt Lockhart, and Ryan Barnett discuss the successful M&A process for Project Black Sparrow, a $19M managed service provider. Revenue Rocket assisted Black Sparrow on both the buy-side and sell-side, helping them identify and close strategic acquisitions. The sell-side process involved evaluating over 500 companies, narrowing down to 25 potential buyers, and ultimately closing a deal in less than six months. The transaction highlighted the importance of strategic and cultural fit, leading to a smooth due diligence and a successful partnership.

1. Helping them grow through a Revenue Rocket Buy-Side Program
2. Helping them grow with deal facilitation/valuation expertise
3. Converting to a Revenue Rocket Sell-Side Program
4. Valuation on the business
5. Packaging and marketing
6. Deal flow (150 screening calls leading to NDAs, 20 IoIs, select LOIs)
7. Due diligence support
8. Role of the buyer – and how the winning LOI was landed (more about the vision than the specifics)
9. Keeping owners focused on the business while we ran the process
10. Exceeding expectations for value, timing
11. Exciting future ahead.

RELATED EPISODES:

Episode 80: Seller's Perspective: Due Diligence. Listen now >>

Episode 88: Sellers: Timeline Expectations for an M&A Deal. Listen now >>

Episode 119: Breaking Down a Successful Sale of a $13M MSP. Listen now >>

Episode 139: Breaking Down the Successful Sale of Project Deacon. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket. 

OUTLINE OF THIS EPISODE:

• M&A Negotiations Introduction
• Setting the Tone for Fairness in M&A Negotiations
• Balancing Interests in M&A Transactions
• Transparency and Trust in M&A Negotiations
• Deal Fatigue and Negotiation Strategies
• Impact of Win-Win Negotiations on Post-Transaction Relationships

RELATED EPISODES

Episode 174: Buy-Side M&A: Tackling the most Challenging task of Finding a Willing Seller. Listen now >>

Episode 143: Perfect in M&A Doesn’t Exist: Learn Where you can Flex. Listen now >>

Episode 100: Looking back at 100 Episodes and Narrowing in on Working Capital. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.