Acquisition strategy


Background:

This Indian IT Services Company has a focus on the education sector providing IT systems and services to schools, colleges and other educational institutions.  It had established itself first in India and then in the US through a number of acquisitions.  It had also opened an office in the UK and built an initial base by acquiring three small businesses.  However, in reviewing its international strategy, the Directors concluded that, although they had built an initial presence in the UK education sector, the UK business was below critical mass so they were keen to acquire a larger UK business in the education sector.

Challenge:  

There were a number of constraints including the relatively high valuation multiples for IT services companies and the limited resources available to make acquisitions.  The challenge was to devise and execute an acquisition strategy that satisfied these constraints.

Solutions:  

As we had advised the Indian Company on its previous UK acquisitions, we were engaged to develop and execute the new acquisition strategy.  A number of sectors were analysed in terms of availability of suitable acquisition targets, client bases, revenues, profits and valuation ranges.  The opportunities realistically available were reviewed and the recommendation made that the Company should acquire one of the leading UK teacher recruitment businesses.  This proposal was agreed by the Directors.

The top ten UK teacher recruitment businesses were analysed and five were identified as potential acquisition targets.  Four of the targets indicated initial interest and meetings were arranged between the Directors and the key representatives of these targets.  Following these first meetings, further discussions were held with three of the target companies and eventually one was selected as the preferred acquisition target.  Following detailed negotiations on price and other factors, due diligence and the legal process, the teacher recruitment business was acquired.

Benefits:  

This acquisition gave the Indian company critical mass in the UK, improved access to the UK education sector and a UK management team to meld all the UK businesses together.

Case Study: David Wyeth

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