Volaris Group was represented on the panel by Jesper Ulsted, who shared practical advice to help CEOs and founders successfully navigate M&A transactions
On Thursday, June 16, 2022, Volaris Group participated in a virtual conference run by World Financial Symposiums (WFS). WFS is an international organization dedicated to educating technology leaders on the current technology and financial landscape, with the goal of helping them build strategies for growth and eventual exit. The focus of the conference was Global Growth & Exit Strategies: Building for Scale & Building for Sale.
Portfolio leader Jesper Ulsted spoke on behalf of Volaris Group, sharing practical insights about tech M&A alongside a panel of buyers that included private equity firms, and players such as Cisco and SAP.
Ulsted provided a summary of his comments below.
Interested in watching the full conference? Watch this space for a link.
1. What gets you excited about a company that you want to acquire?
For me, it’s about our ability to help our portfolio companies find what we call their “inner talent”. Our analytical and data-centric approach to acquiring companies helps companies identify their core market segment.
So, what gets me excited is helping companies become even more successful—by helping them refocus on markets and customer segments that can strengthen the foundations of their business, and set them up for strong, profitable growth in perpetuity.
2. Is there a “right time” for you to buy a company? And for business owners, is there a “right time” to sell?
I’d rather say there are many right moments to buy or sell a business. We buy and never sell, so whether we buy a business this year or in five years doesn’t make a huge difference when you own the company forever, as we do. We don’t sell our companies, even if our businesses are enduring a global pandemic, recession, or geopolitical instability.
Many business owners think that it’s better to sell a company when it has demonstrated growth and profitability for a period of time. We don’t just look at that, but also at the “inner talent” of the company and how we can help the company grow.
Timing is also important for founders or owners we meet who wish to retire, but want to leave their businesses in good hands, and ensure the company’s legacy lives on in terms of culture, brand, employees, and customers.
3. What advice would you give to a tech entrepreneur looking to prepare for the M&A process?
Both buyers and sellers are better served by being honest in the acquisition process, and that’s especially true in the current uncertain environment, where some acquirers may be pressured to make shorter-term decisions. My advice is to go with the buyer that you trust to have the long-term best interests of your business in mind.
If you are looking for extremely fast growth and a huge investment, a strategic investor like Volaris isn’t likely to be a good fit. Rather, you might be better advised to look for risk-loving private equity money. If you are looking for a buyer who can ensure steady growth and long-term consistency, a strategic acquirer like Volaris would be a good match.
4. How do you go about valuing a company?
We value companies on the strength of the “inner talent” and where we think we can get the company, based on the talent they have. We spend time analyzing the company to assess the talent, assess their financial health, and think through different future scenarios.
5. Have COVID-19 or the current economic environment changed your approach to M&A or valuations?
Crises come and go, and since we value companies over a very long time horizon, we aren’t factoring the current crisis into our values.
The current economic environment hasn’t changed our appetite to acquire companies at Volaris. It has only made it more evident that our model is very sustainable compared to highly leveraged buyers whose financing may be impacted by rising interest rates. Since we generally don’t use leverage, our expected returns are consistent over many years and not impacted by the inflation or interest rates.
6. What can potential sellers expect from your due diligence process?
We request data before we go into due diligence, to identify the company’s “inner talent” before arriving at a valuation. Our due diligence process is designed to validate what we initially learned and to identify potential risks.
We issue a due diligence checklist to give the sellers a good overview of what they can expect. Then we plan due diligence meetings, where we discuss our findings and questions we might have. We are flexible on the time it takes to provide the data. The due diligence process can run as fast as three weeks, if the data is prepared in advance.
7. What does life look like after the deal for the selling company, its founders, and its employees?
You will become part of an organization with a global network of many vertical market software businesses. So, one of the first things we try to do is to expand your network within Volaris Group and Constellation Software. We want to ensure you and the employees are aware of the wealth of resources available to you.
Then, we host a series of sessions with newly acquired companies to discuss how we can strengthen and grow the company in the long-term future. Typically, we suggest small adjustments to business strategy, which in the long run can improve the health of your company.
If, for example, after looking at the data together, we identify a customer segment where attrition is lower, we might suggest that the business focus on acquiring more customers in that segment in the future. The transition could take many years, but that’s the good thing about Volaris—we have time to see these changes through because we never sell!
8. How should entrepreneurs get to know you or start a dialogue?
Reach out to me directly. We have portfolio leaders in most European countries, so we will be able to meet with you in person and discuss your unique situation with you.
As you never know what will eventually trigger a desire to sell the company, our approach is to keep in close contact over the years, so that we get to know each other before the time comes to sell. In some cases, discussions can unfold over many years. Just recently, we completed an acquisition in Norway where the founder had been in regular touch with our organization for several years.