Valuing the entrepreneur: a longer-term view on M&A

“If you really believe in your company, why would you sell it?” asks Christiaan Tsirakos, partner at Netherlands-based private equity firm Bestacking.

Of course, there are many reasons why a founder may look to exit their business – from relinquishing day-to-day management to generating short-term liquidity – but why not retain at least a small stake in the company you worked hard to build?

At BeStacking, entrepreneurs are actively encouraged to remain invested after they leave. Target companies are sought for their entrepreneurship, and the knowledge, experience and network that goes with that.

“We don’t integrate,” explains Tsirakos. “Keeping the entrepreneurs on board is the best way to grow the company and our shared platform accelerates this growth further.”

‘Buy and build’ to hold

In contrast to traditional private equity, which has a reputation for ‘fixing and flipping’, BeStacking aims to ‘buy and build’ to hold, with no predetermined sell horizon. The team, which invests its own money, makes decisions geared towards building organisations that can thrive for decades. The focus is on creating lasting value rather than short-term gains.

“Most private equity players aim to sell businesses within five to seven years and make strategic decisions based on that timeline,” says Tsirakos. “If you want to build an organisation that can succeed in the long term - that still exists in 20 or 30 years, for example – you’re making very different decisions.”

Cashing in value

Value works both ways. While the company and investors benefit from the entrepreneur’s continued involvement, the entrepreneur gains more flexibility and control in their financial future. Separating share ownership and employee ownership means an entrepreneur who has worked with BeStacking to build their business is never obliged to sell their shares.

“You can secure some of the value in your company by cashing in some of your shares while also retaining some investment and doubling down on that remaining portion in the longer term if you wish,” says Tsirakos.

He manages the BeStacking vertical of the firm, which focuses on ‘buy and build’ in the IT sector, specifically managed service providers (MSPs). The last company he acquired had two entrepreneurs at the helm - one wanted to pursue personal goals, and the other stayed on board as Managing Director. Both entrepreneurs were able to stay invested. 

And the investment does not need to stop at this generation. “With the deal I’m closing now, the founder asked: ‘How am I going to transfer my shares to my kids in the long term?’” says Tsirakos.

Leveraging knowledge and resources

BeStacking’s decentralised model gives each business unit a high level of independence while at the same time offering a platform that facilitates the exchange of knowledge and resources. Entrepreneurs gain immediate access to a network of like-minded entrepreneurs to bounce ideas off. As entrepreneurs and private equity professionals themselves, the BeStacking team also knows what works and what doesn’t, from both perspectives.

A collaborative approach contributes to the overall growth and success of each business unit while shared HR and technology resources are the two key support axes. This is evident in  BeStacking’s acquisition criteria. Beyond investing in managed service providers, the company prioritises local AI infrastructure, innovative sales methods, IT infrastructure, and talent that can support all its business units.

“Finding the right people - good people - and keeping them and making sure that all the companies are technologically well equipped for the future is vital,” says Tsirakos. “There are a couple of areas that we’re investing in now, which we believe are going to help us in five or 10 years and, of course, the companies that we own are a big part of this resource-building too.”

Building deal networks

The M&A team at BeStacking comprises only four people and the acquisition parameters can be relatively broad. While the market criteria must be met - and the preference is for entrepreneurs who wish to stay invested - companies are not easily excluded at the initial search stage. This can make finding the right company much more time-consuming.

The right technology can make it easier to keep abreast of market developments and to act quickly when opportunities arise.

“You must know the market. You can’t sit behind your computer and just wait until you see some interesting companies - you have to actively pursue them as well,” says Tsirakos. “We use Dealsuite to get in touch with companies and advisers and to stay updated on what’s for sale.”  

The difference is clear after only two months of using the Dealsuite platform, he adds. “There are definitely companies that are on our list because of Dealsuite. In fact, we are signing with one right now.”