M&A activity has been at a frenzied pitch since the lows of the COVID-19 pandemic, and savvy GovTech firm owners who have been contemplating an exit strategy would be wise to take advantage of this opportunity. In order to achieve maximum acquisition value when selling your GovTech business, however, you’ll need to recognize a few crucial truths.
In the previous article in this series, we discussed one such truth: Future potential growth is more important than historical performance when it comes to driving a GovTech firm’s business valuation. So-called “unicorns” (billion-dollar startups like Uber, Airbnb, and Snapchat) have all applied this maxim to great effect. Since many of them have yet to turn a profit, their eye-popping valuations were built on the promise of future rewards for investors.
This insight, however, is just the first step when it comes to unlocking the maximum acquisition value for your GovTech or government contracting firm. In this article, we’ll discuss why so many GovTech business owners fall short of their goals during M&A transactions and how you can dramatically increase your business valuation by emphasizing the right value drivers.
Why Business Owners Need a “Grow-Big-Fast” Strategy
Most GovTech firm owners fail to achieve maximum acquisition value for their companies because of three fundamental blind spots:
- They don’t know the value drivers for the most successful companies in their industry.
- They don’t know how to extract the most value from their company’s intangible assets and IP.
- They don’t know the profile of their ideal buyer or what this buyer would be looking for from their company.
The good news, however, is that achieving your GovTech firm’s maximum acquisition value is possible for any owner willing to embrace a new perspective on the world of M&A. Peter Thiel, co-founder of PayPal and Palantir, expressed this view when he wrote:
“We now have access to all the basic building blocks at incredibly low cost — connectivity, computing, manufacturing, distribution, talent — so it no longer takes thousands of people and hundreds of offices to create a company with significant value, global reach, and market impact. ‘Scaling’ — namely a hyper-growth business strategy — needs to be the core part of your business plan. Competition is much more intense these days and competitive advantages can disappear overnight, so you have to have a ‘grow-big-fast’ strategy.”
Of course, most companies aren’t founded with this “grow-big-fast” strategy in mind. That’s why we’ve created ValueX3: a powerful strategy-building process for growing your GovTech business and capturing its maximum acquisition value.
ValueX3 represents the distillation of our collective observations, insights, and processes. We first determine your firm’s current and potential future values, and then construct the tools, processes, and roadmaps you need to get there. We help you address the blind spots listed above, giving you solid, credible, direct answers to the most important questions you should be asking before any M&A deal.
For example, we’ve identified 18 value drivers for GovTech firms, separated into nine external and nine internal factors:
External Value Drivers
- Market growth
- Market size
- Market share
- Market barriers
- Revenue composition
- Brand awareness
- Quality of earnings
Internal Value Drivers
- Strategic leadership
- Business model
- Management team
- Intellectual property
- Customer satisfaction
By emphasizing and focusing on these value drivers, your business can immediately take steps toward achieving its maximum acquisition value. We can suggest the appropriate tasks to improve your business performance, with the goal of achieving maximum acquisition value within three to six months.
Case Study: GovTech Firm Skyrockets Valuation by 300%
One of our recent clients, the GovTech IT contractor PSI, was able to improve its business valuation by 300% through the ValueX3 method.
Before working with us, PSI had decided that it was “not a good time to sell” based on its existing valuation. In other words, the company believed that it could not realize its goal acquisition price based on the current state of the market.
However, via our guidance and recommendations with the time-tested ValueX3 method, we helped the client repackage itself from “just another government contractor” into a forward-looking big data technology company. Thanks to these changes, the company was sold to a South Korean investment syndicate for $16.3 million — more than three times the original valuation of $5.2 million.
How do some GovTech businesses multiply in value by hundreds of percent seemingly overnight — and what sets them apart from the rest? The answer lies in your company’s maximum acquisition value. In today’s fast-paced, ultra-competitive innovation economy, it’s not enough just to grow — you need a “hyper-growth” strategy that will set your business apart and preserve your competitive advantages.
That’s why we created the proprietary ValueX3 process. Based on our intensive study of more than 5,000 transactions, ValueX3 is an M&A supercharger, helping you realize the most effective and impactful strategies for your GovTech firm.
Want to know more? We’re here to help. Get in touch with our team of experts today for a quick chat about your business needs and objectives. For greater detail on these topics, you can also download our white paper “Increasing the Value of Your GovTech Firm in the Post-Pandemic Economy.”