Due Diligence for Global Investor for Managed Cloud Service Provider Acquisition

Challenge

The client, an international TMT investor, wanted to augment their investment portfolio with an asset in the managed IT services segment by targeting a small managed cloud services provider (CSP). The company serves EMEA and the US and focuses on public cloud migration, management, and ongoing optimization and analytics services for the mid-market tech and tech-driven retail and media segments.

Given the rapidly changing public cloud sector, Altman Solon needed to assess multiple facets of the company’s growth plan, including addressable market, competition, customer acquisition and retention, and margin evolution.

Solution

The commercial due diligence involved a market and competitive review, analysis of company margins and projections, and assessment of business plan assumptions and risks on a per-driver level.

Cloud computing started historically as a peaking power resource for developers with computationally intensive workloads. As cloud computing and storage prices have decreased, along with improvements in stability and security, businesses have started migrating more of their workloads from on-premise or collocated environments to the public cloud. The target’s proprietary software, vertical-specific focus, and strong partnership with multiple key public cloud providers differentiated the target from the long tail of other managed CSPs that have emerged to capture this new and growing opportunity.

Considering these unique factors, Atman Solon developed a top-down, stepwise market sizing approach to estimate and forecast the company’s addressable market by geography, industry, and cloud provider, as well as related expansion opportunities. Supplementing industry and firm research with deep customer, competitor, and former employee interviews, the market forecast and related research gave an in-depth view of the rapid growth of managed cloud services, the fragmented competitive landscape, the customer lifecycle, and the current and projected future states of resale margins, particularly through the lens of this company’s opportunity and if the differentiated positioning was sustainable. Altman Solon rigorously assessed the company’s business model and operations data, comparing with the independent market assessment to determine reasonable growth and market share projections by cloud provider and address key industry and company risks. All of Altman Solon’s analysis and interviews were supplemented by industry benchmarks and proprietary firm research on public cloud services.

Results

Building on the client’s public cloud knowledge base, Altman Solon provided a consistent assessment of the client’s current standing and future trajectory. Studying overall growth, margin evolution, and specific customer needs via thorough industry research and expert interviews ensured the robustness of Altman Solon’s assessment and led to a clear, decisive evaluation of the company, their business model, and future prospects.