Mergers and Acquisitions, Channel investors, Midmarket, Content

Friday’s Exit Strategy: Tequity Advises Salesforce Cloud Partner Mergers, Acquisitions

Within the massive Salesforce cloud ecosystem, consulting partners, integrators and ISVs (independent software vendors) are buying up one another to gain scale, geographic reach and technical know-how.

Tequity Managing Partner Kevin Tribe
Tequity Managing Partner Kevin Tribe

But how are those companies finding each other and negotiating M&A deals? One potential answer involves Tequity, which has emerged as a key M&A advisor to Salesforce partners. The company has advised on five Salesforce partner transactions, including Figur8’s sale to AllCloud in July 2018.

Essentially, Tequity helps provide a potential exit doorway for companies looking to sell, and a thorough company analysis for potential buyers.

“Many are unfamiliar with the numerous steps within the process of preparing and selling their company,” Managing Partner Kevin Tribe tells ChannelE2E. “We provide them with an overview of the activities and timelines they should anticipate, and coach them on issues to avoid that can erode or even derail their chances of a successful outcome.”

No doubt, M&A advisors are hard at work across the IT channel, IT services and MSP ecosystems. Key names to know involve Cogent Growth Partners, Service Leadership, and Martin Wolf, among other firms. For its part, Tequity has carved its niche offering M&A advisory services to software and IT services companies in the mid-market.

Tequity's M&A Advisory Services

At the highest level, Tribe says Tequity helps sellers by providing an upfront analysis of their organization and the overall market. After that, they’re able to look at ways to potentially increase value and minimize taxation in the event of the sale. The firm also provides coaching and project management. Tribe says Tequity then looks at potential buyers using its proprietary database of over 50,000 key executives in technology companies.

“Once we have prepared and polished the information we would want to present to potential buyers, it is housed in our secure online data room,” he explains. “Buyers in varying market segments, or from diverse geographies, or with unique strategies will each have their various reasons to investigate our client. We adapt our presentations to them to illustrate the synergies of the combined companies post-transaction.”

After that, Tribe says they will sometimes help assemble a good client M&A team that includes experienced legal, financial, and tax advisors with strong M&A experience. It’s a process that Tribe says tends to attract multiple buyers and typically generates multiple competing offers.

The Salesforce Connection

Tequity has worked exclusively with software companies and IT services firms, within such ecosystems as Microsoft, Oracle, ServiceNow, and more, according to Tribe.

It was during one particular deal -- Birlasoft's buyout of EnablePath in 2014 -- that Tequity expanded its focus to the Salesforce ecosystem. Tribe says the deal happened at the same time that the Salesforce market was beginning to heat up.

“During this process, we spoke with many companies either interested in doing acquisitions in the space, or shareholders who were recognizing that market timing to explore a sale was very favorable,” he said. "We also attended our first Dreamforce and became aware of the accelerating depth and breadth of the SalesForce partner community.”

Following the success of the Birlasoft/EnablePath deal, Tequity was asked to assist on more deals causing the company to become known as a firm that really understood the Salesforce ISV, consulting partner ecosystem, and M&A valuation, according to Tribe.

“We are seeing a tremendous amount of deal flow in the Salesforce partner market as it continues to evolve and mature,” he says. “Valuations in this market reflect this high rate of growth and remain well above more mature partner ecosystems like SAP, Oracle, and the like."

Heading For A Correction? Perhaps Not

As trends change, Tribe says his company has noticed an uptick in the number of deals in the IT Services world. He believes this reflects the urgency by many companies to implement a digital transformation strategy as they push toward the cloud.

But Tribe is quick to point out that each deal is different and speculating on trends within the sphere isn’t helpful. “Given the diverse vertical markets, geography and specialized solutions within the Salesforce ecosystem, it would be an error to make a blanket statement to cover all situations,” he says. “Some markets are hotter than others, while the maturing of the market is slowing down valuations in some areas.”

He will say that valuations are strong, but we should be prepared for a market correction following nine years of a bullish stock market. Tribe says that will slow M&A activity and lower valuations. “We’re seeing some CEOs and shareholders wanting to take the step of finding a strategic buyer now, in case a market downturn were to come and delay their exit plans for three or more years,” he says.

But Tribe says Tequity has enjoyed working within the Salesforce community. “Just as specialization is increasing within the Salesforce community, it's similar with M&A advisors,” he says. “Those who think they know it all or fail to use specialists are likely losing value. It’s more important now than ever to choose an advisor who is well entrenched in the ecosystem and knows the subtle differences that can increase value and the likelihood of a successful outcome.”