The availability of growth capital can be summarized as there exists billions in US institutional funds that need to be deployed and nearly one trillion in the form of cash and short-term investments held by large companies, that could find it’s way into the deal/M&A market (ACG eNewsletterDec2011).
Both private equity backed companies as well as strategic market leaders, both large and small, will continue to seek investments and acquisitions to adopt to the change and demands of their customers.
Do you know what businesses are attractive today?
The following technology and BPO sectors are very popular because of the attributes of the business model (for example: the recurring subscription nature of the financials) and size of the market opportunity.
- SaaS & Cloud Computing is hot! Deals and more M&A deals are being finalized everyday.
- HR and HCM is once again hot as evidenced by recent acquisitions such as: Taleo, Rypple, SuccessFactors, Kenexa.
Download our overview of the SaaS HR market landscape.
- Digital is hot! We are of course in a digital world, and B2B digital and technology-centric service businesses are highly attractive. Any disruptive technology that involves mobility, cloud computing, social networking, or big data will be looked at by investors and strategic partners.
Global Strategies for Growth & Expansion.
While most companies have historically grown by “following the trade routes” and following partners (both joint ventures and key strategic alliances); the opportunity to create market adoption via online communities is prevalent (email us for a list of the top online communities for your industry sector).
Attracting Useful Capital
Investors turn down entrepreneurs for a variety of reasons. One of the most common ones is that the entrepreneur needs to do more validation before investment capital is committed.
1. Validate the non direct sales revenue model.
Using alternative distribution partnerships and creating fan communities is popular. Note that pitching a plan that relies heavily on “Feet on the Street” sales models is NOT hot and actually considered legacy thinking. Of course, companies need quality sales people. But only after a company has validated its referral marketing, community marketing, and alternative distribution. should direct sales be expanded.
2. Validate the client lifecycle model to demonstrate key financials outperform the competition.
Here is a self-assessment tool (from Sramana Mitra) to help you further evaluate the readiness and attractiveness of your business.
While we enter 2012 in a slow growth economy (download The Playbook for Success in a Slow Growth Economy), the opportunity to create wealth is readily available for global technology and outsourcing service providers.
Note: If you are looking for industry comparables for forecasting growth, or just browsing for industry valuations please let us know at ephor[at]ephorgroup.com