09 Nov Geographic Influence on the M&A Process & Organic Growth
While we specialize in M&A for IT Services firms, we also have been helping these companies grow organically for over 20 years. Our proven specialization, verticalization, and productization (SVP) method is the key to sustainable growth. Revenue Rocket works with global IT Services leaders to secure their market position, expand in new or adjacent markets, and grow profit long term. One area we are going to focus on today is geographic expansion.
When looking at corporate expansion, businesses often overlook the strategic and opportunistic benefits that can come from looking at geographies beyond their current service area. At Revenue Rocket we look at many attributes when uncovering a geographic expansion opportunity for a client. Some obvious ones include; booming economies in niche markets such as an influx of tech investment in a certain city which in turn brings the talent.
A prime example of this was the influx of capital (human and cash) that Austin Texas experienced in 2016 & 2017. Another prime example is the category anomalies seen in markets, such as tourism in Orlando, Digital Out of Home in Las Vegas, or the financial services and investment banking that stems from Manhattan, NYC.
Whatever the motive it is important to work with your M&A advisors to quantify the opportunity and ideally time it perfectly with lifecycle trends to ensure proper valuations are in play. Today we are seeing a significant exodus from high tax states such as California. People that used to perform their duties at a major corporate campus are now encouraged to work from home and as such, talent is turning to more tax-friendly states to homestead. Today the State of California has seen more than $58B in adjusted income leave for lower or no tax states such as neighboring Nevada, Idaho or BIG Texas.
The reason this matters for IT Services companies is that the decision-makers are moving, headquarters are shrinking and the demand for secure working from home technology has skyrocketed. That said would we encourage our clients to seek an exit to a California-owned suitor? Expand there organically? Maybe! It really depends on the circumstances for the parties and the motivation behind the transaction.
Additional consideration should be made for international expansion, such as looking North of the border into Canada, or across the pond at European opportunities. While these can also carry large upside for category significance or emerging trends based on local and social-economic makeup it can also bear additional complexity as localization of platforms, people, and fundamental business practices can differ. It is important that you consider all variables and options when entering a process organically or on the sell side or buy side.
At Revenue Rocket we will use our proven processes to identify unique opportunities that yield the best outcomes and in today’s market that almost always takes into account the option for Geographic expansion.