Modelling acquisitions and mergers of information technology solutions companies in Central- and Eastern Europe

Abstract

Already before the fall of the communist regimes in 1989 the level of investments into Central- and Eastern Europe by mainly western companies was substantial. However since that time the situation has changed a lot and today the European Private Equity and Venture Capital Association (EVCA) has well over 1.200 members. The fundraising f or Central- and Eastern Europe reached a new record level of EUR 2,25 billion in 2006 and the Private Equity investment in the region increased dramatically in 2006 to a level of EUR 1,67 billion. Several - mainly large - companies, including some Information Technology companies in Central- and Eastern Europe are owned or partly owned by such investment (financial) interests, many are still mostly privately owned companies active in the IT sector. Building a network of IT Solutions companies requires a very structured and well planned methodology and specially developed and adapted models, that need to be updated as the company network expands. While the financing of any specific acquisition is a very important part of any business plan, in this case however the most important priority remains the proven feasibility of fast realization of material performance improvements and of synergy effects through the structure of a group of specific but complementary two types of companies, * Integration players, such as System Integrator companies, covering a certain mostly geographical market and * Segment players, such as Consultancy companies or Software solution companies, generating products and solutions to be marketed throughout the area covered by above integration players. The main task of this master thesis is to describe and analyze these different models used in the different stages of the acquisition process of IT Solutions Companies in Central- and Eastern Europe and as much as possible the comparison with actual cases. In order to properly use and apply the different models, one section outlines and explains in detail the preparatory work required before one can execute such a structured acquisition plan. Such includes the description and evaluation of the relevant markets and the company situations in their respective markets, as well as appropriate definitions of the selection criteria. The selection and developments of the different models used in this case and the underlying business plan does not imply that other models cannot be used to achieve similar or even better results. I am certain that many other models used today and in future will lead as well to acceptable results. The models described in this case study are actually used to fulfill the business plan to build a family of IT Solution companies throughout Central- and Eastern Europe. One should be able to use this case study as guidance when building a strategy for a company network of service related companies, as well as when planning an acquisition of an IT Solutions company, independent of assigning an M&A advisor or Investment Bank or doing the selection him- or herself.