Scalability e predictability These are the main reasons that make the M&A and SaaS model a promising investment niche in Brazil. However, there are some criteria that must be observed for a successful acquisition.
Guilherme Tossulino, Director of Strategy and M&A at softplan, will help us to better understand this context. In this report, he shares his vision on strategy, mergers and acquisitions (M&A). It also addresses the integration processes that accompany the growth journeys of these companies. Continue reading to understand more about this market.
M&A and SaaS in Brazil: a hot market
A survey carried out in Brazil with 195 startup founders showed that 70% of them operate in the SaaS B2B model. This result, published in May 2023 by the magazine Small Companies, Big Business, shows that the SaaS niche is, in itself, quite promising in the Brazilian context.
The survey also revealed what is most motivating enterprises in this area: according to 72,8% of those interviewed, the possibility of changing the reality in which they live. Other motivations mentioned were the possibility of greater financial return (24%) and the desire for leadership (21%).
Guilherme Tossulino, Director of Strategy and M&A at softplan, describes the scenario highlighted by the research in two words: liquidity and predictability. “Once I make SaaS investments and create a predictability mechanism – through recurring revenue – this becomes very attractive, as we are talking about something scalable”, explains the director.
“In other words, I start to have a predictability of what will happen, this naturally takes a while investor safety message”, adds Tossulino.
It is also worth highlighting that this acquisition model is advantageous for both the investor and the end customer. This is because, in the recurring service, the consumer always has the opportunity to make decisions as to whether or not to continue paying for that service.
From there, the company is able to obtain a clearer overview of the results achieved, remaining aware of the need to always improve and improve its solutions.
Essential criteria for a successful acquisition
What value is being generated by the product? How is customer retention going at the company? And how is the organic growth of this business? In Guilherme Tossulino's view, these are some essential criteria for a successful acquisition.
Evaluating these aspects offers security for investment, as well as clarity in evaluating the business's growth prospects. “And then we have another very important point, which is the maturity stage of the companies, which is also a determining factor in making the process scalable”, highlights Guilherme.
“For example, we take companies that have a growth rate of, let's say, 5% per month: if the business managed to maintain this rate for a certain period of time, this shows that it has found a growth mechanism. And, therefore, it will naturally move towards growing exponentially”, illustrates the director.
In addition to these more conventional metrics, it is important to also evaluate some criteria that are not necessarily related to the SaaS model.
According to Guilherme Tossulino, these subjective criteria they have more to do with what the partners expect from that business. “This expectation ranges from selling the company while it is still small, without having scaled, to planning the sale for a certain stage in which it is believed that the return will be better”, he ponders.
Understanding Softplan’s M&A process
Administration, culture, governance, technology and marketing are the main fronts of Softplan's M&A process. Guilherme Tossulino explains how these aspects are integrated as follows:
“We started with the Administrative and Organizational culture. Next, we worked on some Governance advice for this business. We then move on to the Technological front, which is when we actually look at the impacts of the product. Finally, our last front is Marketing, where we evaluate sales and growth in order to optimize these results.”
These processes tend to be long because, according to the director, they involve different approaches, with different people dedicated to each sector. Thus, as the integrations are leveraged, the entire process advances as well. “This could take six months or even two or three years, depending on the scenario and complexity we are facing”, says Guilherme.
Cultural fit and acquisitions
Softplan's culture is to encourage entrepreneurship and freedom of the founding partners of acquired startups. In this sense, the cultural fit It is a decisive factor in the success of acquisitions in the company's M&A process.
Guilherme Tossulino explains that the values that attest to the cultural fit between the parties involved include both more objective and empirical criteria, as well as those that are more subjective and qualitative. “We carry out this assessment in the first approaches to understand how this company is structured”, explains the director.
Who are these people? What beliefs are involved? And how can all of this contribute to the construction of a new journey? These are some examples of how cultural fit is assessed in Softplan's M&A process.
“Understanding these aspects is essential, because if there is no compatibility of values, it will not be worth dealing with the friction that an M&A process invariably generates”, adds Guilherme.
The construction of good relationships also dialogues with this context. After all, the chance of a relationship being fruitful is greater when it starts from a positive principle. In this sense, aligning cultural fit in acquisitions is often more important than being stuck with objective indicators.
“First, we need to make sure we have the best people. Then, we think about what they will be able to do together”, concludes Guilherme Tossulino.
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