The evolution of the MVA©
978-566-9990
How do I know what my IT company is really worth?
All IT business owners want to know what their company is worth and how to make it more valuable to a potential buyer. There are many opinions on this topic, from myriad sources, but who do you believe?
Peer groups do a great job helping you understand how to make money and run a great IT company; we’ll leave that subject to them. That’s what they do best. But If you just want to know, or actually need to know, what your IT Services business is worth today to an actual buyer, but don’t want to sell yet; we can help, right now, with our Market Value Analysis© report.
As the IT Service industry’s premier buy-side advisory company – with 95+ closed IT Services deals since our inception in 2010 - we know buyers. We know how they think, how they model opportunity and deal structure, and most importantly, we know how they model purchase price from their business perspective.
While we have closed more deals in the IT Services space than any other firm we know of, we also model prospective transactions that don’t make it all the way – for lots of reasons often having little to do with purchase price -- and of course, because the parties can’t get on the same page on price.
We could write a book on all the reasons for that (hmmmm, that’s a good idea), but in our experience it’s mainly because the prospective seller simply can’t or won’t understand the business reasons why their company is worth what it’s worth to that particular buyer. The #1 cause of deals not getting done in any industry, hands down.
Since the beginning of Cogent in 2010, we have been producing and delivering our Transaction Analysis Model – the TAM© -- exclusively to our buy-side clientele, with great success (it really works), but it was for “client-eyes-only” and it was not a product designed for prospective sellers to review.
Then, one day, a couple of years ago, a company owner said “look, I am not for sale for the next few years, but I’d be willing to pay you to create a TAM© for me so I can understand what your buyers would generally think I’m worth now, and I’m sure it would help me figure out what I could be doing differently, or more of, or less of, so I could learn from it.”
After some internal discussion amongst our Cogenteers, and after consulting with a number of our regular clients, we agreed to create and deliver our first ever Market Value Analysis© report with the TAM© at its core, and it was so well received that the client actually used it to negotiate the exact purchase price we recommended to sell their business to a group they already knew (news to us at the time), and they even introduced us to their buyer, who hired us on a project basis to help them work through part of the deal. We were thrilled to help and the “MVA©” was christened.
Most importantly, a common “valuation” has little to do with the actual “purchase price” that someone would pay for your IT Services business. Our MVA© is different. It is relevant to the state of the market today and it contains exactly the same information that our buy-side clients use to help determine the “purchase price” and structure for deals, from their unique buyer’s perspective.
Our MVA© reveals what a likely buyer for your business would consider as they determine what your company is worth to them, including:
- A complete TAM© for your business, as if you were selling your company to one of our client companies now, in today’s market, but with low/median/high guidance (details furnished upon request once we are under NDA with you. This is proprietary stuff and we can’t just publish the granular items on the internet, right?)
- We’ll develop a buyer profile of the most likely buyers for your company today (because that’s what we do)
- We will deliver an MVA© report customized to your company, along with the with the TAM©, all of which we will review in detail with you. The report will include:
- Our general findings in narrative format;
- Fair market price ranges from low to high, based on our experience, the granular details of your company, and our perspective on how you are a fit, or not a fit with the buyer population generally;
- Various deal structures and payment alternatives that would be most likely given your present operational maturity and risk profile;
- Buyer points of interest (what to keep doing and what to improve)
- Risk factors (pro and con, and what to improve)
- KPI’s and comparison to nominal ranges we recommend (for benchmarking)
- Green flags (things you are doing well and should continue to enhance)
We boil down all of the material above into an intuitive report that includes the completed TAM© that you can use as a map to guide you, for reference, or to make a deal happen – your choice. You can work toward your price range goal, set benchmarks to help get you there, decide to make a move now, use it for a “value appreciation program” for employees, set an ESOP value, underpin a partner buyout, and myriad other uses.
Generally, the MVA© report is a very valuable tool. What you do with it is up to you, but we can help make it work.