Afleveringen
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In this episode of Shoot the Moon, Ryan Barnett and Matt Lockhart explore a common scenario: a business owner receives a call from a potential buyerâor from an M&A advisor representing oneâand suddenly faces a big question: Am I actually ready to sell?
Whether you're planning a structured go-to-market process or simply responding to inbound interest, readiness matters. This episode breaks down what it means to be âseller ready,â why preparation is a competitive advantage, and how to stay in control of the processâregardless of who picks up the phone first.
Weâll cover:
Why taking a buyer call doesnât mean youâre committing to a saleThe pros and cons of one-off conversations vs. full processesWhat a real M&A readiness plan looks likeâand why it adds valueHow to manage buyer interest while keeping your options openThis episode is a must-listen for IT services firm owners who arenât sure if theyâre ready to sellâbut want to be ready when the right opportunity strikes.
RELATED EPISODES:
Episode 92: Why You Should Take the Call from an M&A Advisor. Listen now >>
Episode 177: Fielding an Inbound Call from a Suitor. Listen now >>
ARE YOU READY TO SELL? QUESTIONS TO KNOW THE ANSWERS TOO. DOWNLOAD OUR EBOOK >>
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1. âHow do you like to qualify whether a buyer actually has the capital to close a deal?â
Gut check vs. formal proofDifferences between PE-backed and strategic buyersWhatâs reasonable to ask for and when in the process2. âWhat are some of the best ways a buyer can demonstrate proof of funds early in a process?â
Equity commitment lettersBank letters or balance sheetsFund-level detail for PE buyersIs a LOI ever enough?3. âWhen you see a buyer lean heavily on an earnout or seller note, what does that tell you about their financial strength?â
Earnouts as risk-transfer vs. alignment toolSign of limited capital vs. aggressive valuationHow to structure a seller note to reduce risk4. âHave you ever had a deal fall apart because the buyer couldnât come up with the money?â
Anecdotes of broken deals or red flags missedWhat should have been asked earlierLessons learned about screening buyers5. âWhat questions should sellers be asking to vet a buyerâs financial capacity?â
Go-to questions to ask PE firms, family offices, strategicsWhat not to ask (or how not to ask it)How advisors help behind the scenes to validate6. âIf a seller gets an offer that looks strong on paper â big multiple, big earnout â whatâs your advice for validating itâs real?â
The danger of being âseduced by the headline multipleâDiscounting for deal structure riskHow to tie offer strength to real-world execution ability7. âAre there particular red flags you see when a buyer isnât financially credible?â
Delayed diligence or ghostingLack of transparency around capital sourceToo many approvals needed â unclear decision-makersOffers contingent on future fundraising8. âWhatâs the advisorâs role in protecting the seller from wasting time with unqualified buyers?â
Quietly vetting buyers behind the scenesManaging buyer engagement based on credibilityPulling in references or past deal history9. âWhatâs your take on PE firms that havenât yet closed a platform in the space â does that change how we qualify them?â
Platform vs. add-on credibilityOperational readiness of first-time buyersImportance of fund age and deployment schedule10. âAt what point in the process do you think it's fair for a seller to ask for hard financial evidence?â
Pre-LOI vs. post-LOIHow to handle it without offendingWhen to walk if transparency isnât thereRELATED EPISODES
Episode 203: Selling Your Business to an Independent Sponsor. Listen now >>
Episode 113: Deal Financing- Scenarios, Options and Implications for Both Sides. Listen now >>
Episode 97: Understanding Search Funds as an IT Services Seller. Listen now >>
Episode 99: IT Services Sellers: Evaluating the Size of a Buyer. Listen now >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Zijn er afleveringen die ontbreken?
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Selling your business is more than a financial transactionâit's an emotional journey. Our latest podcast explores the critical balance between emotion and logic in mergers and acquisitions, offering insights for IT services business owners. Key Takeaways:
Understand the deep emotional attachment founders have to their businessesRecognize how emotions can impact deal negotiations and valuationLearn strategies to stay level-headed during the M&A processDiscover the importance of professional advisors in managing emotional challengesWhether you're considering selling or acquiring a company, emotional intelligence is your greatest asset. Our experts provide practical guidance to help you navigate the complex world of business transactions with confidence and clarity. Want to transform your M&A experience? Listen to our full podcast and gain expert insights into successful business transitions or reach out to schedule a no obligation introduction call: [email protected]
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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In this episode of Shoot the Moon, the Revenue Rocket teamâRyan Barnett, Mike Harvath, and Matt Lockhartâunpacks a foundational concept in IT services M&A deals: EBITDA add-backs. Whether you run a Managed Service Provider, a Microsoft or SAP channel partner firm, a cybersecurity practice, or a custom development shop, understanding what qualifies as a legitimate add-back can significantly affect your valuation in a transaction.
The team covers the good, the bad, and the ridiculousâbreaking down why aggressive or misguided add-backs can backfire and erode trust with a buyer. They also explore how recurring bonus plans, inflated owner salaries, and "strategic" spend are treated when itâs time to negotiate your exit.
This episode is a must-listen if you're:
Considering a sale or recapitalization in the next 12â36 monthsWanting to improve your EBITDA story before going to marketWondering if that golf membership you expensed is helping or hurting your exitKey topics include:
The golden rule: âAdd it back only if itâs truly goneâfor goodâOwner salary treatment (especially if you stay on post-sale)Bonuses, personal expenses, legal fees, and other gray zonesBuyer synergies vs. seller add-backsâdonât confuse the twoReal-world examples of questionable add-backs (boats, jets, services and all)Listen to Shoot the Moon on Apple Podcasts or Spotify.
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In this episode of Shoot the Moon, Revenue Rocketâs Mike Harvath, Matt Lockhart, and Ryan Barnett explore one of the most overlooked tension points in M&A: the financial document request.
Youâve nailed the strategic and cultural fit â but when it comes time to share financials, things stall. Why? It often boils down to trust, financial hygiene, and timing.
đ Inside the episode:
Why jumping to the P&L too soon can kill momentumWhat âfinancial hygieneâ actually means â and why it mattersTips for buyers to build trust and earn the right to request numbersWhat sellers should prepare: 3 years of P&L, balance sheet, forecast, and ad backsHow to keep a deal moving when financials are messy or delayedIf youâre buying or selling an IT services firm, this episode is a playbook for avoiding early missteps and setting up a smoother path to due diligence.
RELATED EPISODES:
Episode 170: How to Become a Platform Investment. Listen now >>
Episode 141: Add-Backs 101. Listen now >>
Episode 131: The Importance for Sellers to have Financials in Order while being Acquired. Listen now >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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EPISODE KEY POINTS
Communicating a Business Sale to EmployeesKey Stakeholders and Early CommunicationSelling In vs. Selling OutEmployee Concerns and Communication StrategiesFollow-Up Communication and Integration PlanOverall Communication PlanRELATED EPISODES
Episode 96. Post Combination Employee Consolidation: Doâs, Donâts and What to Expect. Listen now >>
Episode 33. Employee Involvement: Who and When during a Buy Process. Listen now >>
Episode 32. Employee Involvement during the Sale of your Business. Listen now >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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In this episode of the Shoot the Moon podcast, Matt Lockhart and Ryan Barnett discuss the key questions buyers ask when considering acquiring an IT services firm. The discussion provides insights for IT services business owners preparing for a potential sale, emphasizing the importance of being prepared, transparent, and able to clearly articulate the company's value proposition and growth potential. They cover critical areas including:
Strategic fit: how does this acquisition fit into the buyers service offerings? does it compliment it, fill gaps, or extend service offerings? making the buyer more valuable? market expansion?
revenue modelgeographycustomer concentrationhow you have grownProfitability
Flexibility on deal structure
Synergies in Processes / Platforms: What tools are in place to deliverables? Back office, front office, CRM etc...
Having financials in order: do you know your revenue, profit, margins? Tip: Having confidence in the number for the potential buyer
Leadership & Retention post-transaction: What is the seller looking for?
Go-to-Market Strategy: Assessing sales, marketing, and customer acquisition approaches
RELATED EPISODES:
Episode 186: Dealing with Customer Concentration when Selling your Business. Listen now >>Episode 170: How to Become a Platform Investment. Listen now >>Episode 148: 6 Things that could be Surprises to Sellers. Listen now >>Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Rolling equity involves sellers retaining a portion of their equity in a new company structure, often used by private equity firms for future exits. Retaining equity, on the other hand, means sellers keep a stake in their original business, maintaining operational control and potentially sharing services with a broader consortium. Both options have risks and rewards, and the choice depends on the seller's goals, the strength of the buying firm, and the strategic fit. Tune in as we talk through both options.
Here is an example of one of our clients that represented a deal with rolling equity. Learn more about Project Black Sparrow >>
RELATED EPISODES:
Episode 196: Breaking Down the Successful Sale of a $19M MSP. Listen now >>
Episode 184: How Cultural Fit Drives Successful M&A. Listen now >>
Episode 170: How to Become a Platform Investment. Listen now >>
Episode 150: Overview of Rolling Equity in an M&A Transaction for a Seller. Listen now >>
Episode 112: Why Culture Matters in Tech Focused M&A Feat. Chelsey Nord. Listen now >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Mike Harvath, Matt Lockhart, and Ryan Barnett discuss the process of renegotiating deals after a Letter of Intent (LOI) has been signed. They explain that while an LOI is non-binding, it sets the stage for final agreements. Changes in business conditions or due diligence findings can necessitate renegotiation. Key factors include changes in profitability, lost or gained contracts, and discrepancies in EBITDA calculations.
Key points in this episode:
When to Renegotiate the LOIBinding and Non-Binding Terms in an LOIRole of Advisors in RenegotiationsLegal and Contractual Considerations& moreRELATED EPISODES
Episode 158: Between the LOI and Deal Close, What Should you Expect? Listen now >>Episode 105: Pre LOI and Post LOI Information Requests. Listen now >>Episode 104: Honoring the LOI: When to Consider a Re-Trade. Listen now >>Listen to Shoot the Moon on Apple Podcasts or Spotify.
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The podcast discusses how tech-enabled services companies can secure premium offers during mergers and acquisitions. Key insights include: Valuation Factors:
Deals are typically valued at 6-11x trailing 12-month EBITDAGrowth rates of 15-25% are crucialEBITDA margins above 15% are idealRecurring revenue above 60-70% is attractive to buyersCritical Elements for Premium Offers:
1. Organic Growth
Consistent year-over-year growthDemonstrated sales and marketing capabilitiesStrong leadership team2. Profitability
High EBITDA marginsEfficient operational processesRule of 45 (growth % + profit % â 45)3. Market Positioning
Verticalized focusBroad geographic reachSpecialized service offerings4. Customer Relationships
Multi-year contractsLow customer churnRepeat businessStrong customer retention metrics5. Deal Structure
Flexibility in owner transitionBalanced risk allocationPotential for earn-outs or seller notesThe podcast emphasizes working with M&A advisors like Revenue Rocket to optimize these factors and prepare a company for a premium acquisition offer.
RELATED EPISODES:
Episode 166: Understanding Revenue Models and How They Impact Valuations. Listen now >>
Episode 145: Why Sellers with Vertical Market Approaches Earn Premium Valuations. Listen now >>
Recurring Revenue
Episode 19: The Rule of 45. Listen now >>
Check out our podcast playlist on Organic Growth Strategy >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Valuing the Worth of Your IT Services Company: Internal vs. External Valuation Considerations. In this episode we cover:
Understanding the Role of Valuations in IT Services CompaniesImportance of Valuations for IT Services CompaniesInternal valuations and Corporate GovernanceDifferences Between Internal and Open Market ValuationsProviders of Valuations and Regulatory ConsiderationsBest Practices for Periodic ValuationsListen to Shoot the Moon on Apple Podcasts or Spotify.
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We're diving into the critical role of legal counsel in M&A transactions. Key points included the necessity of having an M&A lawyer familiar with the industry and transaction size to efficiently manage legal aspects. The conversation emphasizes the importance of early lawyer engagement, especially during the LOI stage, and the need for open, transparent negotiations to avoid deal fatigue and minimize costs. Best practices include holding regular meetings to resolve issues promptly and focusing on key terms rather than minor details. Effective collaboration between legal teams and advisors can significantly streamline the M&A process and ensure successful deal outcomes.
RELATED EPISODES:
Episode 195: Win/Win vs. Win/Lose Dynamics in M&A Negotiations. Listen now >>
Episode 149: Legal Counsel and M&A Transactions for IT Services Firms. Listen now >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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What does M&A readiness mean as an IT Services firm? We're answering some of the questions you should be thinking about when planning the next move for your business.
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Challenges and opportunities with Carve-outs in M&A
What is a carve-out?Why should corporations consider an M&A process of a division?Who needs to know about the carve-out within the business thatâs being carved out (vs. the portion thatâs not)What key areas do buyers need to dig into to understand the ongoing nature of the firm?How do valuation expectations change for a carve-out?How does due diligence differ in a carve-out?Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Most impactful trends forecasted to hit the tech-enabled services sector in 2025.
Predictions for 2025
MSP targets continue to get multiple offers as consolidation continuesRise in custom app dev space: custom app dev, near shore, and transformation projects continuePrepare for the unexpected with new policiesThe need for security everywhere will continue growth in cybersecurity M&AGlobal M&A will continueSoftware firms will seek partners to consolidate (behind closed doors)Aging tech founders who started businesses 15-25 years ago will look toward exits or exit planningAI & automation will move from magic to deployment, and a search for talent will drive M&AMultiples will increase for niche marketsListen to Shoot the Moon on Apple Podcasts or Spotify.
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Key pointsM&A is a critical growth strategy for top quartile companies, helping them expand market share, add capabilities, and grow geographically.Corporate development functions often lack the specialized skills and resources required to effectively execute M&A, making an outsourced advisor like Revenue Rocket valuable.An M&A advisor can provide objectivity, expertise, and a Dutch uncle role to help guide both the buyer and seller through the complex M&A process.M&A advisors do not have a pre-packaged list of deals, but rather tailor their research and outreach to each client's unique needs and ideal acquisition targets.The post-merger integration phase is critical, and an M&A advisor can help ensure a smooth transition by providing an objective, expert perspective.Outsourcing corporate development to an M&A advisor is typically more cost-effective than building an internal function, with a potential 5x savings.Without an experienced M&A advisor, companies risk common pitfalls like failing to meet expected shareholder value and not dedicating enough time to the acquisition strategy.The tech services sector is expected to see continued M&A activity in 2025, presenting opportunities for both buyers and sellers.Revenue Rocket has 25 years of experience in the tech services M&A space and is well-positioned to help clients navigate this active market.Listeners are encouraged to reach out to Revenue Rocket with any questions about M&A or growth strategy.
RELATED EPISODES
Episode 202: Leveraging Quality of Earnings Reports in M&A Transactions. Listen now >>Episode 190: Buying a Business is not like Buying a Car. Listen now >>Episode 84: Why Inorganic Growth is Never off the Table. Listen now >>Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Key Points DiscussedIndependent sponsors are individuals looking to invest in or acquire their first company, often using outside financing.Independent sponsors differ from private equity funds in that they need to secure funding after finding a deal, whereas PE funds have pre-committed capital.Sellers need to carefully evaluate an independent sponsor's ability to raise the necessary funding to complete a deal.Independent sponsors may offer higher enterprise values than other buyers, but the deal closing is less certain.Independent sponsors should have a strong strategic, cultural, and financial story to present to sellers.Independent sponsors should line up multiple potential funding sources to mitigate the risk of a single source falling through.Sellers can sometimes negotiate shorter exclusivity periods in LOIs with independent sponsors.Advisors like Revenue Rocket can help sellers evaluate and qualify independent sponsors to improve the chances of a successful transaction.Independent sponsors can be a good option for sellers, but the process requires careful consideration of the risks and benefits.
RELATED EPISODES
Episode 173: Why is selling a Business so Hard? Listen now >>
Episode 161: Importance of Determining ROI on an M&A Investment. Listen now >>
Episode 97: Understanding Search Funds as an IT Services Seller. Listen now >>
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Mike, Ryan and Matt from Revenue Rocket discussed the importance of a quality of earnings (QOE) report for IT services firms in the context of M&A transactions, highlighting that it is a comprehensive financial analysis that can provide third-party validation and help streamline the acquisition process. They also explored the benefits of Revenue Rocket offering QOE services as an independent tool to gain market visibility and access to potential buyers and sellers.
Key pointsQuality of Earnings (QOE) report is a detailed financial analysis that certifies the accuracy and quality of a company's earnings and cash flows.
QOE reports are commonly used in M&A transactions, either by buyers to validate the target's financials or by sellers to prepare for a sale.
QOE reports are typically paid for by the buyer or financial sponsor, but sellers may also obtain one preemptively.
QOE reports are not regulated, but should be conducted by reputable providers with industry expertise, financial analysis skills, and the right tools.
Transparency and preparedness are key for sellers undergoing a QOE, as it allows the provider to efficiently complete the analysis.
QOE is a component of the broader financial due diligence process, which also includes reviewing the company's systems, processes, and other financial metrics.
Having a credible, independent QOE report can help sellers prepare for and accelerate the sale process.
For buyers, a QOE report provides confidence in the target's financials and can uncover potential issues or risks.
Revenue Rocket can provide QOE services to both buyers and sellers, but must maintain independence if involved in the transaction.
Offering QOE services can also be a business development opportunity for Revenue Rocket to gain visibility and potentially lead to other engagements.
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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This episode discusses the challenges and strategies for re-entering the market after a deal doesn't close. Key points include understanding why the deal failed, whether due to strategic, cultural, or financial issues. Emphasis is placed on maintaining business operations and maintaining a positive outlook. Advisors can help by revisiting previous suitors and ensuring transparency about the deal's failure. It's crucial to reset expectations, especially regarding valuation, which may change based on current financial performance. The importance of working with experienced advisors and maintaining a fresh perspective is highlighted, along with the need to manage deal fatigue and maintain business continuity.
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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Key pointsConvertible notes provide sellers flexibility to participate in upside if the business performs well, while also offering some downside protection.Convertible notes involve a seller providing a loan to the buyer, with the option to convert the remaining balance to equity at a future trigger point.The conversion trigger is typically a date or milestone, after which the seller can choose to convert the note to equity rather than receive the remaining cash payout.Convertible notes are commonly used in IT services M&A to allow sellers to "have a second bite at the apple" if the combined business grows significantly.Thorough due diligence on the buyer's financial stability and growth plans is critical for sellers considering a convertible note.Dilution from multiple acquisitions is generally not a major concern with convertible notes, as the structure can be designed to minimize impact.Key negotiable terms for convertible notes include interest rate, payment schedule, and conversion triggers/parameters.Sellers should seek legal and M&A advisory expertise when structuring convertible notes to ensure favorable terms.The main benefits of convertible notes for sellers are reduced upfront risk and the ability to participate in future upside.
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