Unveiling the Microsoft Partner M&A Landscape: Insights from Ian Pavlik and Tim Mueller – Part 1 - IAMCP Profiles in Partnership

Episode Transcript
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Anthony Carrano (00:05):
Welcome to the IAMCP profiles and partnership.
The podcast that showcases howMicrosoft partners and IAMCP
members boost their business bycollaborating with other members
and partners. I'm your co-host,Anthony Carrano and in each
episode, I'll be talking to someof the most innovative and
successful partners in theMicrosoft ecosystem. The
International Association ofMicrosoft Channel Partners,

(00:27):
otherwise known as IAMCP, is acommunity of Microsoft partners
who help each other grow andthrive.
Members can find and connectwith other partners locally and
globally and access exclusiveresources and opportunities.
Whether you're looking for newcustomers, new markets, or new
solutions, IAMCP can help youachieve your goals. We'll hear
their stories, learn from theirexperiences, and discover the

(00:50):
best practices and strategiesthey use to increase customer
loyalty and grow revenues.Whether you're a new partner or
an established one, you'll findvaluable insights and
inspiration in this podcast. Wehope you enjoy this podcast and
find it useful and inspiring. Ifyou do, please subscribe, rate,
and review us on your favoritepodcast platform.
And don't forget to follow us onsocial media and connect with us

(01:14):
on our website,www.profilesinpartnership.com,
where you can find moreinformation, resources, and
opportunities to partner forsuccess. Thank you for
listening, and now let's getstarted with today's episode.
But before we dive into ourinterview, let me ask you a
question. As a Microsoft partnerand member of the IAMCP, have
you wondered about the processof selling your business? Well,

(01:37):
if so, then stay tuned becausewe have a great show for you
today where we delve into thedynamic world of Microsoft
partner mergers andacquisitions.
Today, we are thrilled topresent an insightful
conversation with twodistinguished guests, Tim
Mueller, managing partner andcofounder at IT Exchange Net,
and Ian Pavlik, who was theowner of pavlix.com before

(01:58):
successfully selling thiscompany, who will share their
unique perspectives andexperiences in this evolving
landscape. Our discussion willcover a range of topics from the
current trends and challenges inthe M&A market to the
intricacies of deal activity anddue diligence. We'll explore the
motivations and timing behindpivotal decisions, the criteria
for selecting the right buyer,and the critical factors for

(02:21):
successful integration postacquisition. Ian, who recently
sold pavlix.com, will providefirst hand account of the
transition process, the role ofM&A advisors, and its
exciting new ventures. Pavlixwas a technology company with
over 50 employees and 230customers.
The company provided robust webportal solutions, Microsoft

(02:42):
Dynamics implementation andcustomization, and managed IT
services to public and privatesector organizations globally.
Its proprietary IP, Dynamicsexpertise, and a deep community
roots allowed it to serve itscustomers both directly and
through a network of resellers.Meanwhile, Tim will shed light
on emerging technologies andmarket trends that are set to

(03:04):
shape the future of theMicrosoft partner ecosystem.
IT Exchange Net is a globalM&A consultancy specializing
in smaller mid-market mergersand acquisitions exclusively in
the IT and digital marketingindustries. The firm sells
leading channel partners likeMicrosoft, Oracle, Salesforce,
and ServiceNow as well as MSPs,MSSPs, VARs, and digital

(03:28):
marketing agencies.
With an extensive buyer databaseof more than 90,000 IT and
digital marketing decisionmakers, the firm sells IT
businesses value under30,000,000.
So sit back and enjoy part 1 ofthis comprehensive guide to
understanding the complexitiesand opportunities within the
Microsoft partner M&A world.And as always, stay tuned until

(03:51):
the end to find out how you canconnect with our guest and
continue the conversation beyondthe podcast. Let's hear what
they have to say. Alright. I'dlike to welcome Ian and Tim to
the podcast today. Thank youboth for joining us. Really
appreciate it. Let's start bytelling us a little bit about
yourself.

Ian Pavlik (04:11):
Great. Glad to be here. Ian Pavlik. I'm the former
owner and operator ofpavliks.com and the portal
connector. Now I am happilysemi-retired running a, a
charity.

Tim Mueller (04:23):
Tim Mueller, managing partner of IT Exchange
Net. And, thank you again guysfor letting us join the the
podcast today. Background isthat spent 25 years as an owner
operator of three differenttechnology companies. I had
successful exits with those. SoI've been a buyer and a seller
and now as managing partner ofIT Exchange Net.

(04:44):
I'm a middleman. So we bringbuyers and sellers together.
And, I've been doing that forjust about 13 years of my
career. And, very gratifying tobe able to unlock the value for
a lot of these owner operatorsthat have spent a good part of
their lives building theirbusinesses. So that's a little
bit about me.

Well, let's let's jump right in then, Tim. I
mean, that's excellent. Whydon't you share with us a little
bit about what are some of thecurrent trends and challenges in
the Microsoft partner M&Amarket that you guys are seeing?

You know, there there are probably more
opportunities than there arechallenges, mostly because, you
know, there's a a giant demandfor Microsoft partners at this
point. But as they look at thepartners themselves, they are,
the buyers are trying tounderstand a number of things.
One is, you know, where do theystand with the new cloud partner

(05:37):
program? There's been a lot ofpivots by Microsoft, and the
buyers are still trying tofigure that out when they look
and do due diligence on thesellers. And the sellers are
trying to pivot as well to tobe, something that is of greater
value for themselves, but alsofor their clients.
Another one is the Copilot AIinitiative. So many things we're

(06:00):
reading right now about variouspartnerships that Microsoft has
and the various iterations ofCopilot, yet many of the
partners still don't know whatto do with it. They're not quite
sure how to bring value to theircustomers. Therefore, it's hard
for them to tell the buyersexactly where they stand in the
Copilot ecosystem. It's gettingmore clear by the month,

(06:23):
obviously, and the the partnersthat are the ones that are
probably the most seductive havesomeone that is dedicated to
understand where the future maybe for them when it comes to
Copilot.
Every one of the of our,partners should at least be
evaluating where their futurestands with this AI, tool

(06:43):
platform as they become agentsfor it. But that's a big deal.
Another part of it is just thebetter greater understanding of
Microsoft Dynamics. You know,Dynamics seems to change, at
least every 18 months in somefashion, and a lot of the
partners are still trying tofigure out where their place is
within that Microsoft Dynamicspiece. And, and so if it's

(07:07):
difficult for them, it's reallyhard for our buyers.
But overall, the the number ofbuyers out there that are asking
us for more, what we'll calltargets, for acquisition in the
Microsoft ecosystem seeminglycontinues to increase by the
year.

That's fantastic. And let me ask you
this then. So as a piggybackquestion to that, so I know you
mentioned, like, 3, you know,you know, evolutions, like, with
the technology around cloudCopilot and just, you know, with
Microsoft Dynamics. What otherhow are these trends, you know,
aside from just, you know,around those three technologies,

(07:44):
what are are there any othertrends that have evolved over
the past years in this in theM&A market?

Yeah. Well, private equity in general, they're
sitting on about a$1,000,000,000,000 of dry
powder. So that's money to bedeployed. And that is their full
time job is to find goodbusinesses to deploy it and then
help it get to a future exit 3,5, 6 years down the road. So the
money is out there in theprivate equity side.

(08:11):
From the strategic side, sothink businesses that are just
like yours as a Microsoftpractice but bigger, those are
strategic buyers. And they haveshareholders, boards of
directors, and they don't acceptthe fact of each one of these
businesses growing at 10, 12, 15percent per annum, which is

(08:32):
pretty much the standard formany practices. And the only way
to address that shareholderpressure to grow revenue is by
acquisitions. And so because ofthat, you have both a kind of a
perfect storm of a lot of moneysitting out there from private
equity to be deployed, and thenshareholder pressure from the
strategics are saying, you mustgrow your revenue so that the

(08:56):
accretive value, the the longterm value of their business is
higher. So we're seeing that asa couple things.
The other part too is there's astrong demand from the buyers to
the Microsoft partners to say,increase your recurring revenue.
Because so many partners overthe years have been kind of eat
what you kill, project based.And to get the highest

(09:18):
valuation, Azure helps themquite a bit now with more
recurring revenue, is toincrease that. And that is based
on contracts that are either,monthly, not as sexy, or yearly
or or multiyear, which isincredibly seductive for the
buyers because what that does ismitigates the risk when they're
coming in to buy one of thepartners.

Ian Pavlik (09:41):
Can I can I just jump in and sort of on that
point, I think, you know, Imean, I'll get to sort of my
story in a minute, but thatrecurring revenue element was
something that Tim hit on earlywith us, and I was able to,
bring to light when talking topotential buyers. But I also
realized in that it was a animportant part of our strategic,

(10:02):
initiatives back in or I sayaround 2012, 2013 when we
started to grow our recurringrevenue. I can't emphasize that
enough and agree with Tim thatwhatever partner is out there,
focus on recurring revenue ifyou want to exit at some point.
It just increases your multipleenormously.

Rudy Rodriguez (10:22):
Tim, I've got a question for you. You know,
you've talked about thematuration of the industry and
the challenges that are takethat, you know, switching to
generative AI and and partnersadapting to to the marketplace,
and the value that they providetheir customers. Has that
affected any of the deals thatyou've been working on in the in
the Microsoft partner space? Youknow, has it increased or

(10:44):
decreased, the activity or thevolume of compared to previous
years?

That's a really great question, Rudy. And and I
would say that, compared to,say, pre-COVID, it's a vastly
different world right now,partially because what's has
exploded with, you know, OpenAIand then you have, you know,
Gemini through Google and andother tools. And, really, what

(11:09):
they are right now is mostlylarge language model tools that
help people. That wasn'tnecessarily a huge demand
pre-COVID because it wasn't eventhough it's been around for 10
years in some form or fashion,it hasn't really hit kind of
commercial status. Today, itdoes affect the way that the
buyers look at our clients tosay, if you haven't figured out

(11:32):
what your strategic initiativewill be, at least, are you
thinking about it and tell usyour vision?
And so, yeah, that is probablydissuade some buyers from moving
forward with some of our clientsif they at least didn't have
some rudimentary knowledge orsome kind of long term strategy
on how to best implement it.

Tim, thank you. That that's fantastic to give us
a sense of the general M&Alandscape. I really appreciate
that. So, Ian, let now let'stalk about you because you had
your business, pavlix.com with asuccessful liquidity event. Tell
us a little bit about, you know,why you decided to sell, and,
what were some of the, like, themotivations there?

Ian Pavlik (12:15):
I started the business back in the
mid-nineties. And for probably15 years or so, it was really a
lifestyle business. It was abusiness that we, like Tim
alluded to, we grew at anaverage 10, 15% a year. It was a
means for us to live acomfortable lifestyle and,

(12:36):
wanted an exit at some point,but really didn't, focus heavily
on it. It wasn't until around2010 when I started to put a pin
in the future and said, I wannaexit at some point.
In order to do that, the mathhas to work. And it was
strategic decision, but itrequired a lot of conversation

(12:57):
amongst the owners. I was amajority, owner, but my it was a
family based business. I had totalk to the family to say, this
is what I wanna do, and this iswhere I wanna go. Are you on
board or not?
And so it required a lot ofconversations over a number of
years to get everybody pointedin the same direction to say

(13:17):
yes. What if and when the theopportunity presents will pull
the trigger. I think having towait until there was an
opportunity put on the on thetable and then try to decide on
or do we wanna exit is probablyfraught with problems. So we
were we had those conversationsearly, but, it was it was a

(13:37):
decision that I wanted to dothings in my life that weren't
revolving around the business.And I realized in order for me
to achieve those goals anddesires, I needed to sell the
business.
I needed that liquidity eventthat you talked about. So it was
really a means to the end to anend for me, but it required
that, those tough conversationswith family. And and just with

(14:00):
the Key family, really wasn'tsomething that I openly shared
with the team to say that Iwanna exit someday, but I know
that everybody knew at somepoint it was inevitable.

Now I wanna I wanna kinda go back to something
you had mentioned earlier. Sowhen, you know, when Tim was
talking about the generalM&A landscape and, you know,
the conversation around, youknow, the importance of
increasing reoccurring revenue,to drive up that multiple. Now,
you know, as our as ourlisteners know, as I I shared in
the opening, you know, aboutPavlix that, you know, as a as a

(14:31):
tech company, with over, youknow, 50 employees and 200, you
know, plus, you know, customersthat you guys provided, and
correct me here, you know, inthat, you know, robust web
portal solutions, MicrosoftDynamics implementations and
customizations, as well asmanage IT services to public and
private sector organizationsglobally.

Ian Pavlik (14:50):
Yep. Hang on. Yeah.

That was, that was the business. Talk a little
bit about the because I'm Iwanna keep that point where you
said we we really focused on,you know, on wanting to drive up
recurring revenue, right, to toincrease the multiple at the
exit. Can you, you know, talk alittle bit about what was either
maybe, like, some of thedecisions that you made, to to

(15:13):
do that, but also just some ofthe, you know, inflection
points, that are in the in theconversation with the family, to
kinda shift that, right, thatmindset. Because I think a lot
of our, you know, our listeners,you know, in the community,
they're they're, you know,they're out there building their
business, and it's it's it'sthere's a lot of information out

(15:34):
there that talks talks about,you know, oh, you need to do
this. You need to do that.
You need to get to this number,etcetera. But I really wanna
hear what, like, that going onin the mind of the family.
Right? And and those the natureof those conversations. Can you
can you share some of that?

Ian Pavlik (15:49):
Sure. Yeah. It's I think it really comes down to
realizing that when you have thegoal of exiting and knowing that
recurring revenue will help usachieve that end result quicker,
the early on pain of moving torecurring revenue becomes an
easier decision. You know, youyou do these projects where you

(16:11):
get the nice big bang or hit arevenue, or you say, okay. I'm
gonna reduce that, you know,that deal size initially by half
or even 70%.
But I get a recurring that'sgonna, you know, forecast out 4
or 5 years. That's a hard onesometimes to initially accept on
the cash flow side becausesuddenly you see a bit of dip in

(16:31):
your numbers or you got yoursalespeople having to sell
differently or explain things toyour customers. Marketing's
gotta market differently. Therewas a whole number of
conversations that we all haveto be on the same page to
operate the businessdifferently. But it took a
couple years.
Again, I'm going back into sortof the late teens. But what it's

(16:51):
it's like a snowball. Right? Assoon as it starts going, it
becomes the easier way, and youstart to get the salespeople
being excited because now I getcommission for the next 3 years,
not just next month, and andthat starts to evolve. I think
for us, it was then it became astrategic decision for each of
my department heads to say, howcan you convert some of your

(17:12):
service work into recurringcontracts or find add on
partners or elements instead ofpitching a $100,000 service
project, it might be an $80,000one where we also include some
components that have recurringrevenue and licensing or service
or management or what have you.And that just took a bit of
education and training. And, butit but it was a strategic

(17:36):
decision for us across all thedifferent departments.

Mhmm. I've got, like, two more two more
questions around this thisdecision to sell. So I
appreciate you kinda flowingwith me on this, Ian. Now what
do you what advice, like, wouldyou give to, you know, other,
you know, owners who who let'ssay they're in a multiple
ownerships, partner situation.You know, the majority owners,
like, yeah, I wanna look for,you know, a future exit, but

(18:00):
maybe their, the other partnersaren't on board.
So what would be some thingsthat these are maybe, some
advice you would give, questionsto encourage them to ask, things
to think about to help move thatneedle internally to get
alignment around that type of ofan event?

Ian Pavlik (18:18):
I think it's open conversation, but it just say,
"Hey. Are you interested? Whatif?" Have those "what if"
conversations.

Mhmm.

Ian Pavlik (18:26):
But, also, I what worked for us was throwing out
real scenario, and I would cometo the table with our, group of
owners and say, okay. Let's saywe got an offer like this. This
was the number and this was thesituation. How would you feel
about it? And then what thatallowed was a real feeling of,
"Woah. No. Hey. I couldn't. Yes.I could. What if we were to sell

(18:46):
tomorrow and you had to leave 3months later? What if we sold in
6 months and you got half ofwhat you need, but you could
stay on for 4 years? How wouldyou feel about that?" So we had
those real scenarioconversations, and it sparked up
feelings of I don't want someoneto be my boss, or, that's not

(19:06):
enough.
I don't know what is enoughmoney for me. And once they once
and that was actually a big one.What is enough? So if somebody
is a minority shareholder andyou get to decide definitively
whether we're gonna buy or sell,and they end up with enough of
what or what they feelcomfortable with, if if it's
something they feel comfortablefor their share, then they're

(19:28):
gonna make the transition andthe sale process a lot easier
and smoother. But if you'repushing that rock up a hill and
convincing them something that'snot right for them, then, it
just makes the whole thing a bitharder.

So, Ian, you shared a lot of great, you know,
background information. Reallyappreciate your transparency
with our audience. Were thereany other, like, market
conditions, or circumstancesthat also played a role in this
decision to sell?

Ian Pavlik (19:52):
Well, I think a big influence was COVID, to be
honest. When COVID hit,initially, in those first for
first few months, it was hard.It was really hard for us. Just
the whole cash flow issue.
And and, you know, as anybusiness owner, there's ups and
downs and and, struggles, andnot just was, this this sucks.

(20:18):
But then but then we got a hugerebound. And in the in the
couple areas of our business,everybody needed that service,
and everybody need that portalsolution, and everybody wanted
remote working. And we reboundedlike crazy, and suddenly inside
of, like, 6 months past what wasprobably one of the hardest cash
flow scenarios was suddenly wegrew by, like, 40%, and now

(20:39):
we're trying to deal with hiringand and whatnot. So for us, that
was a a an interesting time tonavigate.
We came out of that year of ofbig dip and big rise, and then I
was wondering, so what what arewe worth now? What's the market
gonna pay for us? And that wasreally the the burning question.

(21:02):
I didn't fully understand whatour multiple might be and how
that might play out. And thatwas sort of the beginning of me
thinking, okay.
We're sitting at our the highestrevenue we've ever had. And I
now I wanted to know if I wereto go to market, what would the
what would the offer be? Andthat was when I started to do my

(21:23):
research, and, thankfully, Icame across, Tim and and IT
Exchange Net.

That's fantastic. That's that's really,
really great. And I know, youknow, Rudy has with his
accounting background, he's gotseveral questions about some due
diligence. So, Rudy?

Yeah. You get to hear all this, Tim, because
these questions are for you.This is my favorite background.
As a former auditor and havingdone a lot of due diligence and
having, not only sold a coupleof companies, but we bought 28,
in the process. Due diligence, Idrove everybody crazy with those
two words, due diligence,because there's two sides to

(22:03):
that story.
So can you tell us a little bitabout what you focus on during
the due diligence process in inon these M&A deals? Because
that's so important on bothsides. Can you tell us a little
bit about what you focus on?

It is, Rudy. And I think it first and foremost, it
starts with preparation. We doan onboarding process with our
clients just like we did withIan and his team to give them a
little bit of expectations ofwhat are what's to come. One of
my mentors, Mark Morgenstern,always says that expectations
unarticulated is disappointmentguaranteed. And so we wanted to

(22:38):
make sure that they hadexpectations that it was gonna
be, it was gonna be timeconsuming, and it's gonna be
unending until the deal isclosed and the money is
transferred.
And so the idea of being able togive our clients a really
detailed list of the things thatthey will be asked for, whether
it's operating agreements,shareholder agreements, it's

(23:02):
employee records, customerrecords, things on that line, so
that they can start populating adata room ahead of time because
many of the buyers will belooking to see what kind of
figure do they have on the pulseof their business. And if simple
data requests for due diligencetakes weeks to get to, that
tells the buyers a lot about theway that the business is run and

(23:24):
the organization of it. And so,it spans from not only the
financial side of it, but allthe way through to technology
audits. And and if in fact youdo have a a like, the the portal
platform solution that Pavlikhad to sell, you really wanna
look and see even down to thesource code how brittle or how

(23:46):
strong the code is and howscalable it could be. Due
diligence also comes in the formof something called the quality
of earnings report, where mostof the the more sophisticated
buyers will hire a third party,and they will do a quality of
earnings, otherwise known as a Qof A.
So, a Q of E, I'm sorry, reportthat allows them to really do a

(24:11):
forensic audit of the businessand trail where all the money
comes from, how it'scategorized. In fact, does it
reflect what was promoted by theseller during the beginnings of
the conversations? And, andthen, you know, equally
important is that how you betbest state your EBITDA and your

(24:31):
adjusted EBITDA. And theadjustments are really just add
backs that, in the simplestterms, you look at a buyer that
says, alright. I know all thedifferent expenses you had were
were fine with the IRS, allabove board, but likely, we're
not gonna pay for those afterthe transaction.
So think, you know, Yankeestickets or running a company car

(24:54):
through the business or countryclub that you use to entertain
clients. A lot of those expenseswould not be assumed by the
buyers, so those are consideredadd backs into your EBITDA. And
that helps the seller quite abit because most of the, much
like with Pavlik, you know, mostof the the offers are made on a

(25:15):
multiple of your adjustedEBITDA. So if you do put add
backs in to show what the futurestate of the business will be,
that will help your transactionvalue.

Well, I've got a I wanna drill down a little bit
on on couple of things that youmentioned there because these
are things that, from personalexperience, that bit me pretty
hard, in in acquiring companiesis how do you assess a company's
technology and the value thatthat's gonna bring to an
organization? Because that's oneof the challenges, you know, in
future integrations that takeplace. Then also taking a look

(25:48):
at at their customer base and,you know, how good that really
is, especially from a recurringrevenue standpoint because
you've mentioned earlier onabout the length of certain
contracts. And because all thesehelp you in market position, and
and just when you acquiresomeone, that's really
challenging for the buyer to toacquire and assimilate those

(26:12):
companies because there's acultural component as well as a
financial component. Can youshare a little bit about how you
assess those things?

Yeah. And and having done a couple dozen
transactions, Rudy, you knowthat you've both benefited and
not benefited from that. And I'msure if we turn the mic back
over to you, you could show tellsome more stories of of how
those things have occurred. ButI'll start with the second
question first and then go totechnology. Customers all

(26:41):
customers are not, you know,made equal.
You know, many of the differentbuyers are looking for customer
concentration. Meaning, do youhave any one customer that
represents more than, let's say,15 or 20% of your total revenue?
And if you do, that creates agreat risk for the buyer for the
obvious reasons. You know, ifyou buy the company and that

(27:03):
that company, that, the clientthat represents 40% of your
revenue is gone, Now it's notthe same company that you
thought you bought. So customerconcentration is one big issue
that buyers look at when they'redoing their due diligence.
Secondly is the the term ofrecurring revenue. While those
two words are some of the mostattractive words in our

(27:24):
industry, they also, mean thingsdifferently between buyers and
sellers. Many of the sellerssay, alright. Recurring revenue,
we've done business with theseguys for 10 years. We can count
on their business every year,but it's not backed up by any
kind of contract.
And so if the business is notcontracted to do something over

(27:44):
a year or two years, buyers willnot necessarily categorize that
as recurring revenue. And sothat is a is a rude awakening
for a lot of sellers when theyget into that due diligence. And
then lastly is, you know, isthat revenue something that is
of strong margin? You know,revenue that is low margin work.

(28:04):
You think in the past with VARson selling computer equipment
and how razor thin those marginshave gotten over the years
versus something that is like aSaaS platform that has high
recurring revenue because it'sbacked by a contract, but it's
high margin because at a certainpoint, you're just doing updates
to it, and it just kind of makesmoney.

(28:27):
It it it produces money. So,that's a little bit of about the
recurring revenue and and thekind of due diligence that we
see with with the financialside. On the technology piece,
one of the biggest questionsthat our buyers have is, is it
scalable if we try to take thattechnology or some kind of
process and drop it into ourclient base? Because many of the

(28:51):
buyers, when they look at anacquisition, they not only say
what can that company do, tobring a new service offering to
our current service offering,but how can we cross pollinate
our services between eachcustomer base? And so, if a
technology that has beendeveloped doesn't have really

(29:12):
the the, firepower or the muscleto be able to scale, then that
due diligence piece of it isgonna probably fail.
There are some sophisticatedbuyers that do have their own,
you know, kind of forensicswhere they go in, and they'll
they'll be, you know, someonethat looks a lot like Ian that
sold his business or herbusiness, and they're an expert

(29:34):
in a certain area. And privateequity firms or strategics may
hire them to go in. And justduring that due diligence of the
acquisition, as the expert inthe room, really tire kick and
and stress test that technologyto make sure that it is what has
been purported.

Ian Pavlik (29:51):
Can I just maybe add something to that that I think
is relevant? When we wereselling and the portal connector
was a piece of technology thatwas part of our our offering. We
had a vision of what we thoughtits future looked like and how
it could evolve and where thetechnology could go. And that

(30:11):
was how we spoke about it andspoke to its value. In the end,
the company that acquired us hada very different perspective on
its value and has taken thetechnology in a slightly
different direction.
All very valid and very good,but just not the way that we
were looking at it. So I thinkin hindsight, being open minded
to how your technology that thethe buyer is potentially

(30:33):
acquiring will be used is justsomething that you need to
consider.

Yeah. I'd like Ian, I'd like to follow-up on
that because I know when you'reselling your company, it's like
selling your baby. Right? Soit's yours. You built it. You
put your you know, all yourblood and sweat and tears and
everything into into buildingyour company. And then, you
know, it's it's great to hearfrom Tim on the structured due

(30:58):
diligence process because we youknow, that's foreign to you the
first time you sell a company.So what were the challenges that
you may have run into during thedue diligence process that
really got to you? I know someof them are not easy and some of
them take a lot of time. So Sowhat were the most challenging
aspects of of the due diligenceprocess?

Ian Pavlik (31:16):
For me, I would say it was two things. First say
that what I think worked wellfor us was I had a very strong
handle on and I was big onnumbers. I loved to manage the
company by the numbers, and Ihad spreadsheets and reports and
ways of tracking everything,which really helped during the
due diligence process so that,you know, I didn't have to go

(31:37):
digging and creating certainforecasts and so forth because I
kinda knew all that stuff rightaway. So that worked for me. But
it's it is, tough to open up andsay, here's my customer list.
The actual names of thecustomers, here's the revenue by
each one because you wanna goand explain. This is why this
customer dipped last January,and this is why we lost this one

(31:59):
but got this. And so there's astory behind all of it. You
can't always tell every storyabout every bit of data that is
there. You have to hand it overin a way that hopefully informs
the the buyer enough that theyunderstand it.
So that was something I wantedto talk more about it than than
was really possible. And I'd sayalso a hard part was keeping

(32:22):
that circle small during the duediligence part of who I brought
into that circle to help pullthe data together. So there are
some people that could aid init, but they weren't people that
I felt comfortable at that pointin the sale process to let them
know the reason I need you to orthe reason I need this source

(32:43):
code, the reason I need thatreport. Could you please give me
a summary of what a a moredetailed forecast of what this
this sales forecast for yourcustomers. Well, why do you need
that?
You never asked for that before.Well, so that those were some
some of the the challenges thatwe faced. But, the process that
Tim led us through initially ofthe the homework saying here's

(33:06):
the data ahead of time that youhave to prepare for it. I
probably spent a good, I don'tknow, I'd say 6 to 8 weeks,
about 50, 60% of my timegathering that info ahead of
time before the due diligenceprocess started so that so that
it was there and I wasn'tdistracted trying to do the

(33:27):
gathering of the data at thesame time as all the other
things that go along withmeeting with potential buyers.

You know, one thing I will add on that one is that
we were lucky with Ian is that afar majority, I wanna say 75% of
the Microsoft partners whodecide to sell don't have the
ability or have not been able tobuild their business to have the
time that Ian did to put intothat. They they don't have the

(33:54):
infrastructure behind them orthe team members to run the
business. And so Ian did itperfectly, really. He did it so
the fact that he became lesssignificant by design to the
business, so that not only theexit would go smoothly and the
buyer would not necessarily needhim to stay on for 2 or 3 years,
which wasn't his game plan, butalso for the ability to, you

(34:19):
know, answer the call when datawas needed for due diligence.
So, I would say Ian's deal was alittle bit atypical in that
sense because his listeners herefrom Microsoft partners hear,
him talk about that. I thinkthey might get discouraged
pretty quickly to say, gosh. I'mnot sure I've got the time to do
it because I'm still doing newbusiness development or I'm

(34:41):
still doing some execution oroperations. So I just wanna make
sure that is is clear as ananomaly more than anything.

Ian Pavlik (34:49):
And and and to that point, it was a decision
probably 10 years prior toexiting that I knew that in the
beginning of my name was in thethe title of the business. But
strategically, I was trying toensure that I was not what the
customers wanted to speak to ortalk to or interface with. I
wasn't part of the salesprocess. I wasn't part of the

(35:10):
service delivery. I I surethings were escalated to me if
it required.
But I worked hard at thatbecause I knew that at some
point if I wanted to exit, Ididn't want the buyer to require
me to be around because I wassome sort of, you know, pin that
you know, everything kinda wentthrough. So yeah.

Well, you know, I will tell you, you're a lot
smarter than I was during thatprocess.

Ian Pavlik (35:37):
Just lucky, maybe. But it's but it's it's a bit of
an ego thing too. And I I've gota lot of business partners. I
was in, some peer mentoringgroups like Vistage or Tech up
here in Canada. And, and there'sa lot of people who and and
that's goes back to thebeginning.
The business was a, means to anend for me. It wasn't my, my

(35:58):
reason, and it didn't deliverthose the the core of what I
wanted to do with my life. Andfor some people, it is. And
that's great. Right?
So they're not knocking it. Butif if if your identity is tied
to the business, then it becomesfar more difficult for you to
become less, less involved, lessimportant. Because when the deal

(36:18):
was done, I was no longerpresident and I wasn't key. And
when I walked out that door,nobody called me. My phone
stopped ringing.
And you need to be okay withthat. I know that sometimes some
people aren't. To each theirown.

This wraps up part 1 in our interview with Tim
and Ian. The first part of thepodcast episode delves into the
intricacies of the Microsoftpartner M&A market,
highlighting the increasingdemand for Microsoft Partners
driven by private equity andshareholder pressure. Key trends
include the importance ofreoccurring revenue, the impact
of technology like Copilot AI,and the evolving landscape of

(36:54):
Microsoft Dynamics. Ian shareshis experience of successfully
navigating the sale of hisbusiness, emphasizing the
significance of preparingdetailed financial and customer
data for due diligence andstrategic shift towards
reoccurring revenue. Tim addsinsights into the due diligence
process, stressing the necessityof scalability and low customer

(37:15):
concentration for a successfultransaction.
Thank you for joining us today,and be on the lookout for part
2. In the meantime, don't forgetto follow us on social media and
connect with us on our website,www.iamcp.org, where you can
find more information,resources, and opportunities to
partner for success. One of thebest ways to partner for success

(37:37):
is to join IAMCP, a community ofMicrosoft partners who help each
other grow and thrive.
IAMCP members can finallyconnect with other partners
locally, globally, and accessexclusive resources and
opportunities. Whether you'relooking for new customers, new
markets, or new solutions, IAMCPcan help you achieve your goals.
To learn more, visit the IAMCPwebsite at www.iamcp.org.

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Unveiling the Microsoft Partner M&A Landscape: Insights from Ian Pavlik and Tim Mueller – Part 1

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Unveiling the Microsoft Partner M&A Landscape: Insights from Ian Pavlik and Tim Mueller – Part 1