Private Equity groups and institutional investors have long been attracted to the technology and software provider business model.

Technology Enabled Business Services (TEBS)

Private Equity groups and institutional investors are attracted to technology enabled business services due to the fundamentals of the business model. Several key factors include:

  1. The need for all small businesses and emerging enterprises to outsource multiple business processes and functions to remain cost competitive and to gain access to capabilities/expertise/resources/tools otherwise unaffordable;

  2. Macro-business trends driving market dynamics such as the increased need for mobility, risk management and governance requirements;

  3. Highly fragmented mid-market;

  4. Economically efficient model driven by recurring revenues (long-term contracts, valuations, high switching costs);

  5. Operational performance driven by people performance, scalable customer acquisition and cost models

  6. Increased dissatisfaction with service levels from Fortune 500 vendors presents small business and mid-market opportunities.

  7. The median software industry exit valuation grew 46% during 2009 but still closed the year below 2008's median TTM revenue exit multiple. (SaaS exit valuations were 1X-5X TTM revenue)

  8. Seventy-three public software companies issued multiple announcements in 2009 expressing their intent to buy smaller software companies in 2010.
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