Mattias Kaneteg, founder and CEO of Miss Group
‘Buy and build’ is a highly effective growth strategy that enables you to quickly achieve scale through careful and strategic additions.
Unlike organic growth, in a short space of time you can diversify your service offering and expand into new markets, elevating your brand and transforming the size and dynamics of your business.
At Miss Group, we practice what we preach. In the last 24 months, we have completed 14 acquisitions across Europe and the USA, including Seravo, MMD Networks and Euronic in Finland and Interneto vizija in Lithuania. It’s a highly successful, fast-growth strategy that’s resulted in an exceptional return on investment for all shareholders, with an internal rate of return (IRR) of more than 100%.
The strategy is ambitious, but in a market ripe for consolidation it’s a proven way to bolster market position. It’s hard to escape the fact that across Europe the economic landscape has been profoundly affected by the global pandemic. However, amongst the job losses and distressed businesses, there are companies that have a proposition that’s primed for growth – in regional, national and global territories.
While the opportunities for growth might be clear, it’s essential to make the right buying decisions and pay the most appropriate price, while ensuring target companies are both a strategic and cultural fit that allow for seamless integration.
So, what do tech businesses need to consider when going down the route of buy and build as part of an overall expansion strategy?
How to select the right funding partner
To achieve a high rate of growth, you need to have the right funding in place. From there, you can very quickly utilise that investment to drive outstanding growth, adding additional complementary acquisitions in geographies where there is strong potential.
Like any major business decision, there are a number of factors that you need to consider when selecting the right partner. Do they have industry experience, sector reach and intelligence in localised markets that will help leverage your business? Deal history, a complementary portfolio and a reputation for focusing on growth and developing businesses, is hugely important, but the key is the team – whether that’s an investment team or those within your business.
When you start on your investment journey, it’s not always about the money; it’s about the people. In M&A it’s all about making quick decisions. If you don’t have the right team in place to go through those opportunities quickly, then the deal is lost. The right funding partner can play a vital part in making that process work. If they’re aligned with what you want to achieve, and have a desire to follow their cash and not just crystalise their investment, then the relationship will develop into a fruitful one.
How to execute a buy and build strategy
There are a number of key elements to buy and build that will translate into growth through acquisition. Firstly, planning and strategy. Having a desire for growth is one thing, but unless you create a road map and visualise what future success means to you, then your ambition is likely to fail at the first hurdle.
It’s a well-used phrase, but there is real value in following the mantra ‘fail to prepare; prepare to fail’. You cannot underestimate the importance of creating a solid foundation for your strategy to sit upon. Be clear what your objectives are from the beginning and what’s important to the business. Emphasis should also be placed on establishing a value proposition, carrying out competitor analysis while focusing on your own key strengths, core customer base and revenue streams.
Once your strategy is in place, you need to consider the issue of raising finance and making your business attractive to an investor. When engaging with an investor, make sure you:
- Highlight the calibre and track record of your senior management team
- Focus on the quality of your proposition
- Be clear on your expansion plans
- Demonstrate you have an excellent business model
- Show there is real market opportunity and you have the potential to meet market demand
- Be clear about what makes you stand out from the crowd and that you have the drive to take the company to the next level.
When you know the time is right
Knowing when to exit a business, or kicking off a larger round of funding that results in you exiting from one investor for another, can often be guided by the success of your business and the impact it’s having on the wider market.
As a business, you may have a three, five, even 10-year plan to grow the business, before considering future investment options. But when a bigger company or investor starts to take an interest in your business, you will naturally begin to consider the range of possible options. If you overdeliver against your original business targets, and an attractive suitor comes knocking when you’re reviewing the next stage of expansion, the timing can often be perfect.
At the end of the day, I’m an M&A person at heart. I love doing deals and bringing more companies into the Miss Group family. Buy and build is a proven concept and, if done correctly, has the potential to enable a tech company to enter new markets, create a stand-out brand within the sector, and achieve expansion at an accelerated rate, while retaining the integrity of the business.