Business model and growth strategy
High proportion of recurring revenue
Our business model is based on a high proportion of recurring revenue. This gives us stable and predictable cash flows that create opportunities to act on a long term basis. It also makes the Group less sensitive to temporary declines in individual companies. The software is increasingly delivered as a cloud-based subscription. For our customers, this means low investment costs and that costs for development, operation, maintenance, upgrading and support are included in the ongoing agreement. They receive a secure overall offering at a known cost.
Growth through acquisition
Vitec is an industrial player that has a long-term perspective. We are mainly growing through acquisitions of well-managed software companies in vertical markets in Nordic countries. We acquire established companies with well-known products in mature markets, which means that the Group’s organic growth is relatively low. The acquisition work is governed by a number of specific criteria that entirely determine if the companies are a good fit with Vitec.
In Vitec, we have many years of experience and a high level of expertise in the development, sales and support of niche software. This makes it possible for us to identify acquisition targets that are fully in line with our strategy based on a number of important aspects. One decisive factor is that the acquisition must contribute to increasing the Group’s earnings per share. Good profitability and positive cash flows are therefore important.
The acquisitions made in our existing verticals contribute to increased market share, while acquisitions in new sectors leads to increased risk diversification. We continuously have a hundred interesting software companies on the prospect list. Before we decide for an acquisition, we spend a great deal of time and commitment in personal meetings with people in the companies. It is important that we agree on fundamental values, the business model and strategies since the acquisitions take place based on the companies staying in the Group.
The acquired companies are profitable and well-managed companies. Therefore, it is important to maintain the smooth functioning of the business and the important local industry knowledge after the acquisition. The local management is supported by processes and infrastructure that exist in the Group. All companies are followed up with common key figures that govern the strategic direction towards a high proportion of recurring revenue and focus on good cash flows. In the Group, we have common principles for how the product development should be planned and implemented to ensure that our offering is relevant in the future. The decentralized management requires that all managers have understood and act on the basis of the Group’s strategy and corporate culture.
Strategy for brand and products in acquisitions
All operations within the Group contribute to strengthening the Vitec brand. We put Vitec in front of the name of the acquired company and gradually change over to Vitec as the only logo. We retain the names of the products, which are communicated to the market together with the brand Vitec. Acquisitions may mean that we offer products in an industry with partly overlapping functionality or even competing products. In such cases, we make no immediate changes, but instead evaluate in upcoming new development if there is a possibility to create components with support for all product lines. In this way, work begins that future-proofs the products and creates a new, joint product line for all customers within the specific industry.