Industries

Commercial Diligence Leads to PE Growth Investment in Payments and Tech-Enabled Services Software Company

Situation and Challenge

A middle-market private equity fund was considering investment in a payments and tech-enabled services company. The client hypothesized that the target company’s revenue and EBITDA could be doubled within three years, while simultaneously serving as a foundation for adding on further tech-enabled services focused on the municipal government end market.

The client partnered with ZS to validate this growth hypothesis and determine how that growth could be achieved, including which markets offered the most immediate potential, what scalable sales model would be needed to capture the growth opportunity, and how much investment would be required.

Solution

ZS performed market research and conducted interviews with company and industry leadership, municipal software experts and government purchasing decision-makers. ZS then segmented and analyzed third-party market data to determine the geographic regions and customer segments with the highest immediate potential, and recommended a scalable hiring plan to capture that opportunity.

ZS created an ROI model based on target company financials and current (and expected future) sales force productivity to project revenue and EBITDA growth under the phased hiring plan, allowing the board to monitor and course correct as needed.

Lastly, ZS performed a commercial assessment of the target company to identify current gaps in sales force effectiveness, and recommend the most critical next steps to take after acquisition to bridge these gaps and focus on priorities for growth.

The ZS Impact

The fund acquired the target company and pursued ZS’s recommended segmented sales strategy and hiring plan. The client also made an add-on acquisition to accelerate market capture and build out a “next phase” commercial strategy for the broader payments and tech-enabled services platform.

The new commercial strategy drove the company to achieve 24% year-over-year revenue growth, and accelerated the add-on company’s subscription revenue growth rate 50% over the year before acquisition.