A leading global private equity investor approached Stax on behalf of its portfolio company, a leader in IT security, to support due diligence for an add-on to the portfolio company. The target is an emerging player in a network security category in which the portfolio company already has an offering sold outside the target’s core geographies.
Our work tested critical deal rationale hypotheses related to the target, including expectations of growth and customer retention, channel perception of the target and its competitive set, potential for negative revenue synergies from brand conflict, and customer value of the target’s technology portfolio. Stax also sought to understand how well-received the target was outside its home market, which represented a sizable share of its business.
The fact base for our work comprised about 240 phone- and web-based interviews across 6 markets in North America, Asia, Europe, and the Middle East.
The client and its portfolio company received a clear, data-driven perspective on both its critical deal rationale hypotheses, and issues the portfolio company would likely need to consider post-acquisition.
Stax found that customers planned to grow their installations in the near term, that they highly valued the target’s engineering prowess and strong customer support, and that customer satisfaction was high overall. We also found strong opportunity outside the target’s home geography.
While we found a favorable outlook overall, Stax identified some risk of conflict with channel partners, and some potential risk for negative revenue synergies in some of the target’s markets.