How to scale, prepare for sale and maximise value of your company – an interview with software VAD entrepreneurs
Our IT Services Corporate Finance Director, Matt McRae, sits down with the co-founders of Nuaware Limited, Zaheer Javaid and Luke Hasty. The Moore Kingston Smith Corporate Finance team advised Zaheer and Luke on the sale of Nuaware, a born-in-the-cloud value-added distributor, to Exclusive Networks in 2024.
Matt: Thank you for joining us. To start, can you tell us a bit about your software value-added distributor (VAD) business and your journey to selling it?
Luke: We founded Nuaware in 2016, seeing an opportunity to develop a distributor at the cutting edge of cloud, DevSecOps and containerisation. Beginning as a two-person start-up in a small office in south London, we rapidly scaled the business to over £50 million revenue and built a highly specialised and capable team around us.
As we scaled, we focused on deepening our consulting, implementation and training capabilities, making us a key partner for our technology vendors and VAR community. After a strong growth trajectory and building a solid customer base, we successfully exited the business through a sale to Exclusive Networks, a French-listed software distribution specialist.
Matt: What were the key strategies you used to scale your VAD business?
Zaheer: Scaling a VAD business requires a mix of strategic vendor partnerships, a strong sales process and value-added services. We set out to become a true partner with a handful of carefully selected strategic vendors by not only providing a channel to end-users but also helping grow the vendors’ markets through consultancy and training services.
We also worked with start-up vendors on their marketing strategies to become fully embedded within their organisations and create deeper relationships. Another crucial aspect of scaling was our focus on building a strong company culture.
We invested heavily in training and development programmes for our team, which not only improved our technical capabilities but also increased employee retention. This was vital as we scaled, as it allowed us to maintain consistent quality in our service delivery.
Luke: We focused on developing deep sector expertise in our product markets to differentiate ourselves from generic distributors. This was a key part of our strategy to become an indispensable partner for our vendors.
The vendors we partnered with were in early-growth phases. Unlike most VADs, we were initially concentrated on market creation through marketing and direct touch sales. As the vendors grew and the market matured, we expanded those responsibilities to value-added resellers who could more comfortably invest in the new market category.
Matt: What was your key value proposition to customers and how did you ensure customers recognised it?
Zaheer: Our customer value proposition centred on delivering tailored solutions with ongoing support rather than just transacting software. We made sure we really understood our customers’ needs to advise them on the ecosystem of solutions that would give them the best results. We positioned ourselves as trusted advisers, providing consulting, customisation and seamless implementation, which made us indispensable to our customers.
Matt: How did you select the right technology partners for your business?
Luke: Choosing the right partners is critical. We evaluated vendors based on:
- Market demand – ensuring the vendor’s software had a strong and growing market presence that was well positioned for the shifting dynamics in the market.
- Partner support – we looked for high-growth, start-up vendors who needed a sector-expert partner who would go further than simply transacting their software.
- Integration capabilities – choosing solutions that complemented each other so we could provide a seamless ecosystem for customers.
Zaheer: We also prioritised vendors with strong partnerships and a commitment to integration. This allowed us to create unique, bundled solutions for our customers, increasing our value proposition and stickiness in the market.
Matt: What are the most important steps you would advise entrepreneurs to take to prepare a business for sale?
Zaheer:
- Securing contracts – lock in long-term contracts with customers and vendors to ensure predictable revenue. This provides credibility to your forecasts which is key to maximising offer values.
- Incentivising the team – make sure your key employees are incentivised to stay post-sale. We made sure our key employees wanted to stay on after the sale by providing bonus schemes tied to delivering our growth forecast. This gave us confidence that we could deliver our forecast through a potential earn-out period as part of a transaction.
- Ensuring clear reporting data – maintain transparent and well-documented financial, sales and operational data. This is crucial to proving the value of your business and ensuring a smooth transaction. Using accounting and CRM software that generates detailed reports on revenue, customer retention and operational efficiency makes due diligence smoother and enhances valuation.
- Diversifying your portfolio – reduce your reliance on any single vendor. Aiming for a more balanced portfolio not only de-risked the business but also made it more attractive to potential buyers.
Matt: How did you evaluate different deal structures and what was most important to you?
Luke: We looked at different deal structures, including:
- Upfront cash vs earn-out structures – While upfront cash obviously involves less risk, many deals involve performance-based earn-outs. We were on a fast-paced growth trajectory and felt confident that demand for our services during a global shift towards digital transformation would increase so were comfortable with a significant performance-based earn-out as part of the consideration.
- Equity in the acquirer – Some offers offered partial equity in the acquirer which we weighed up on a case-by-case basis. While this can be an attractive feature to an offer, it is important to thoroughly review the acquirer to ensure you are confident in their strategy and ability to deliver future growth.
- Tax implications – We worked with the Moore Kingston Smith tax advisers to structure the deal in the most tax-efficient way.
Matt: Looking back, what would you have done differently in scaling and selling your business?
Zaheer: Bring in senior hires earlier – To make the business less dependent on Luke and me. When selling your business, the key question any buyer will have is what will happen to the business if the shareholders stepped away? If the answer to that isn’t “business as usual”, it will likely affect deal structure, valuation and how long it will be post-transaction before you can leave the business.
Luke: Start preparing for sale sooner – Even if you’re not planning to sell, getting your financials and operations in order early makes the business stronger overall. When we engaged Moore Kingston Smith on the sale process, they mentioned several things that would have been beneficial but did not fit our timeline. If we had engaged an adviser to help us prepare the business long before our planned exit date, we could have implemented more of their suggestions, which would have made the transaction process much smoother.
Matt: What are your plans for the future?
Luke: The market for how software is being built, bought and sold is shifting considerably. With cloud marketplaces like AWS offering third-party software sales and AI tooling significantly decreasing the barrier to entry to become a software company, there is more value than ever in helping companies understand the market. We plan to continue working with vendors to help them navigate this changing landscape.
Matt: Any final advice for software VAD business owners considering an exit?
Zaheer: Focus on building a business that is valuable with or without you. Create predictable revenue streams, strengthen your team and always keep an eye on market trends. Even if you’re not looking to sell now, run your business as if you are, as it’ll make it stronger in the long run.
Get expert advice early on
Even if you are not planning to sell for some time, talk to us at Moore Kingston Smith. Our integrated team of tax, legal and financial experts will find the best structure for your business at the outset to ultimately maximise your sale value.
