ServiceNow partner M&A’s
The ServiceNow Partner market is one of the most sought-after areas for mergers and acquisitions (M&A) in the IT automation and workflow sector, with many significant deals in recent years continuing this trend. The recent pandemic has done little to dent this trend, and acquisitions are expected to continue due to the strong demand for credible partners, as ServiceNow continues to heavily influence the IT marketplace.
ServiceNow's cloud-based platform and solutions are used by thousands of enterprise customers worldwide, including over 85% of the Fortune 500, and ServiceNow expects its Partners to be a significant source of growth over the coming years.
ServiceNow Partners offer services across various categories, including implementation services, license resales, managed services and looking for differentiators such as bespoke product sales becomes an important driver in revenue generation. Strategic and private equity investors are often interested in acquiring ServiceNow Partners due to their high margins, recurring revenue, cross platform capabilities, talented workforce, and client base. Multiples of revenue are the primary valuation determinant in this market, and the purchase price for recent transactions ranged from 0.5 to 2.8 times trailing 12-month revenue or 3 times EBITDA.
Once acquired, there is often ample opportunities to optimise and rationalise all aspects of the Partner business, integrating and rationalising where needed to increase revenue and profits. The focus on revenue generation through the sales process is becoming more and more difficult in this saturated marketplace, so identifying and playing to your strengths and differentiators becomes paramount. Educating the sales force with informed, relevant, and comprehensive playbooks is a necessity to gain this competitive advantage.
Equally maximising utilisation of delivery teams through more fixed priced engagements, optimised SDLC processes and knowledge and acceleration artefacts increases EBITDA across the company.
In 2020 we were acquired by private equity, the primary appeal being:
Recurring revenue through product sales and managed services
Blue chip clients, which indicated we were offering something unique to win and retain the most demanding of customers.
High EBITDA (48%) due to our focus on fixed price engagement models for all projects and maximising utilisation of delivery teams
Highly talented and multi-faceted workforce, nurtured and grown to provide true consultancy and implementation services; the former is often is so often neglected in the Partner space
High reputation in the marketplace for delivering value to solve real business challenges; over 60% of our revenue came from custom workflows to automate IT and business processes.
The demand from investors for Partners remains high, and the market is fluid, indicating that industry consolidation is likely to continue in the next several years. Firms considering buying or selling, organisations can maximise their ROI in this hottest of markets.
