High percentage of recurring revenues
Our business model is based on a high percentage of recurring revenues. Software is delivered through the Internet, by means of a subscription. This provides us with stable and predictable cash flows that create the prerequisites for a long-term approach. It also makes the Group less sensitive to temporary declines within individual business units. For customers, this entails minimal investment costs, ease with which to set up and start using our software, and the long-term security of having quick access to upgrades and new functions.
Growth by acquisition
Vitec is an industry player with a long-term outlook. Our growth is mainly achieved through company acquisitions. The companies we acquire are well-managed vertical software companies with products established in mature markets. Our acquisition work is governed by specific criteria that wholly determine whether a company is suitable for Vitec. One example of such criteria is that the company must offer software in the form of standardized proprietarily developed products aimed at a particular vertical market. Another example is that the acquisition must directly contribute to an increase in the Group’s earnings per share. Consequently, it is vital that the company demonstrate solid profitability and positive cash flows at the acquisition date. We do not invest in future expectations. Our continuous list of prospects comprises some 100 software companies of interest.
At Vitec, we have longstanding experience and vast expertise in the development, sale and support of vertical software. This enables us to identify acquisition targets that are fully in line with our strategy, based on our criteria. Acquisitions implemented within our existing verticals contribute to increased market share, while acquisitions within new sectors increase our risk diversification. Before deciding on an acquisition, we invest a considerable amount of time and involvement in personal meetings with the people working at the company. It is crucial that we agree on fundamental values, business models and strategies, as our acquisitions are implemented with the aim of retaining the acquired companies within the Group.
The companies we acquire are profitable and well-managed. They have well-functioning operations and valuable industry know-how within their niche. We introduce post-acquisition changes at an appropriate pace, in close dialog with local management, who are supported by the Group’s processes and infrastructure. All of the companies are monitored using shared key metrics that steer their strategic focus toward a high percentage of recurring revenues and an emphasis on robust cash flow. We also apply Group-wide principles on how to plan and implement product development, so as to ensure that our offering will remain relevant in the future. Decentralized decision-making requires that all managers understand and act in accordance with the Group’s strategies and corporate culture.
Strategy for acquisition-related brands and products
All of the Group’s operations contribute to the strengthening of the Vitec brand. We add “Vitec” to the legal corporate names of acquired companies and gradually switch to using the Vitec logotype exclusively. We retain the product names, which are then communicated to the market in tandem with the Vitec brand. Acquisitions may result in our offering products with partly overlapping functionalities, or even competing products, within a particular niche market. In these cases, we do not introduce any immediate changes, but assess, in conjunction with the development of new products, whether components can be created to support all of the product lines. This allows us to commence work on future-proofing the products and creating a new shared product line for all of our customers within the particular niche market.