Given these facts, it is imperative for buyers to understand the path to value creation followed by successful acquirers. We analyzed European software deals over the past decade using data from Cepres. Our analysis considered majority buyouts as well as growth deals usually minority investments by financial sponsors. It broke down the total value creation for buyers into three categories: top-line growth, margin expansion, and valuation multiple expansion.
This finding highlights the path of financial sponsors, which seek to maximize their exit proceeds. They make what is called an initial platform acquisition and then build upon that with subsequent acquisitions, developing the investment story of the combined assets, rather than improving profits. Strategic acquirers, specifically nontechnology buyers, tend to follow a similar route. For them, increasing their overall valuation multiple by adding and integrating a software asset into their company is a key value-creation approach.
See Exhibit 3. First-time buyers of software assets primarily create value through business model innovation and, potentially, new products. More mature companies are most likely focused on consolidating the market and scaling up their business by acquiring assets along different steps of the value chain. Buyers with the highest maturity deploy the new software capabilities throughout the whole organization, thereby increasing the penetration of new technology in the company and transforming their legacy business.
In order to accurately assess a target and avoid overpaying, buyers of software companies need to conduct a comprehensive and rigorous due diligence process. In the software industry, the process is distinctive in some respects, especially with regard to assessing the potential for technological disruption. Performance and Value Creation. High prices for software targets are an economic consequence of the high demand for software assets and capabilities. To ensure that an acquisition price accurately reflects the value of the assets and capabilities, buyers need to first understand which companies they are competing against and the underlying drivers of valuations.
They can then dive deeper into the sources of value for specific industry segments and, ultimately, specific targets. Buyers that succeed in acquiring the right software assets and capabilities at the right price will position themselves to reap significant benefits in the digital future.
Rapid Growth and Favorable Economics In an increasingly digitized world, software applications have become omnipresent in businesses. You may also be interested in:. Recurring Revenues. Many software business models feature recurring revenue streams—such as annual subscription or licensing fees and a periodic maintenance charge.
A High Potential for Scaling Profitably. Because the product has already been developed, an incremental increase in sales does not lead to a corresponding increase in costs for inputs. Customer Stickiness. Churn rates are typically quite low, owing to high switching costs for customers. This is especially true for business customers—software, once adopted, can become integral to business operations.
A quite common sales strategy is to get a foot in the door by selling customers small bundles of products or services. The company then expands the relationship through upselling and cross-selling of additional software products.
An Abundance of Potential Targets. The software industry is fragmented, offering the potential for consolidation. More than 10, assets globally are held by private equity and venture capital owners, and many more are in public markets approximately 1, companies or privately held more than 40, The Pandemic Has Accelerated Trends Affecting the Industry The software industry has been among the most resilient industries during the pandemic.
Respondents in some industries industrial goods, travel, and financial services expect that spending on IT tools to support remote work and collaboration will remain a key strategic priority even after the pandemic. However, respondents in other industries retail and health care and the public sector expect to revert to their prepandemic focus on spending related to analytics and the digital customer experience.
Applications for analytics, business intelligence, cybersecurity, and overall corporate security were cited by respondents as the most critical software for competitive advantage. Respondents also expect more software applications to transition to the cloud. Across industries, spending on cloud-based applications will be highest for communications, collaboration, content management, customer relationship management, and artificial intelligence and machine learning solutions.
An Accurate Assessment Requires Rigorous Due Diligence In order to accurately assess a target and avoid overpaying, buyers of software companies need to conduct a comprehensive and rigorous due diligence process.
A buyer should structure its software due diligence along three dimensions. Market Growth, Trends, and Risks. A buyer needs to understand: The Market. Investigate the sizes of the total addressable market and the serviceable addressable market; the growth potential of each software application, market segment, and region; and the underlying growth drivers.
No credit card needed. Try it for free here and check yourself! Check various features of ConvergeHub here. For pricing, click here. What is the difference between up-selling and cross-selling? How to leverage CRM for cross-selling and up-selling? And a bonus tip! What cross-selling means… Cross-selling means selling a different product or service to a customer to increase the value of the sale.
What up-selling means… Up-selling means selling a higher-priced alternative product or service to a customer to increase the value of the sale. Cross-selling and up-selling differences… Many people get confused between up-selling and cross-selling. Check the graphic below to understand the difference between cross-selling and up-selling- Image Source- sketchbubble. Benefits of cross-selling and up-selling Image Source- adamenfroy. Considering how expensive it is to get a customer, it is better to sell him more than spend money finding another.
The CLV of a coffee drinker at Starbucks might be even higher depending on the number of cups they purchase in a day. By up-selling and cross-selling, you are increasing the CLV of a customer every time they purchase from you. He pays for the bed and the sale ends. The next day or a few weeks later, he feels the need to buy a mattress and pillows. What are the chances that he will come to your store? What if he sees an ad from your competitor and decides to go there? By cross-selling, you are killing the competition then and there without your competitor knowing about it.
Build stronger customer relationships- Bad selling can irritate a customer, good selling impresses her. What is good selling? Good selling is consultative where your sales rep plays the role of advisor. Your rep is not only thinking of the immediate needs of the customer but also her future needs.
Good selling is the foundation for stronger customer relationships. People want to buy from companies they can trust with solving their problems. The prices of your recommended products are important. When cross-selling, recommend products that are much below the price of the main purchase. But you can surely sell a higher version of Honda or Ford to him.
Up-selling and cross-selling using a CRM… Upselling and cross-selling can happen in various ways. Build Lists and Campaigns. Every Cross Sell Opportunity Report can be turned into a list, giving you the ability to quickly identify people you'd like to receive offers.
Change your list criteria on the fly or add your own custom data for endless possibilities. Convert any Cross Sell Opportunity Report into a campaign to send offers out via email, postcard, or letter. Also create an outbound call campaign for a personal touch. Make sure everyone receives your next campaign with a print backup for your email offers.
People with email addresses on file receive emails while everyone else receives a print piece.
0コメント