I spent a number of years working in Mergers & Acquisitions (M&A) in the Media and Technology Sector. Part of my role as an Analyst involved looking at valuations of private companies, many with Customer Relationship Management (CRM) systems, many without. Although investors were often looking to invest in innovative and unique products and services, a company’s fundamentals were equally as important when making a decision to buy a business. One major fundamental of any business is evidence of the firm’s current customer basis and orders, and historical evidence of growth. Having a CRM system in place to demonstrate the business’s client base, products, leads, marketing campaigns, and opportunities pipeline can add a huge amount to your company’s valuation.
A CRM system is used by a business to track its interactions with its customers and potential customers. A CRM system can help identify areas of the business that are doing well and those areas that need improvement. Any decent CRM system will offer a reporting and analytics tool to give evidence of the business’s operating position.
Many M&A firms won’t even consider a business as a potential target if it doesn’t have a CRM system. A company that can’t show that it takes reporting seriously will be questioned by any potential investors. Plus, analysts don’t want to trawl through hundreds of spreadsheets and papers to get an overview of the business.
That CRM business you’re considering purchasing may look a bit expensive right now when your business is just starting, but in a few years when you are looking to exit, the CRM system could add a large amount to your final valuation.
I’ve seen businesses that would only buy another firm that had the same CRM system as the investing firm, as the cost and difficulty of migrating the child CRM system into the parent would be prohibitive. These days, migrating between CRM systems is a lot easier and there are many consultancies who can help make the transition a quick and easy process.
Assessing the value of a CRM is a crucial step in the M&A process. It helps M&A professionals understand the potential of a company and its ability to generate revenue.
Are you an M&A firm looking to value CRM systems? I can help you identify the true value of a firm’s CRM system and identify ways to develop the business past M&A. Drop me a message to start the conversation.
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