Arrowpoint Advisory has always has a strong affinity to the Test, Measurement & Control (TMC) sector and every year we complete multiple transactions for clients across a range of applications and technologies for use in the field and in the laboratory.
The firm operates what we believe to be a genuinely unique integrated international team serving the sector, with particular areas of excellent in lab sciences in the UK, in sensors in Germany and in industrial and commercial applications across the US and Sweden.
While our clients are diverse, over the years we have seen a number of similarities, from frequently very high gross margins to the sometimes lumpy revenues that are engendered when growing businesses are selling complex technical products, the stickiness of proven customer relationships and the fundamental passion for the science and new product development.
More than this, we have seen the same challenge facing our clients time and again. This is the difficulty and stress in growing international revenues. Where you are selling small numbers of high value and complex instruments finding distributors with the ability to understand and the willingness to focus on selling your products is hard and they require a lot of time consuming management. The alternate strategy, having your own direct sales force, is often prohibitively expensive and a poor senior territory sales hire can result in wasted months or years and the failure to capitalise fully commercially on expensive new product development.
Indeed frequently the difficulty and risk in building international sales and distribution is a major driver of the decision to sell, as a corporate acquirer is seen as bringing this capability to the table to allow accelerated growth.
With this challenge in mind, in June we made international development the central theme of our annual TMC lunch at Morton's on Berkeley Square, London. We were delighted to be joined by a room full of the CEO's of small and mid-tier companies in the space as well as the business development directors of a number of large listed corporates form the sector and specialist TMC investors.
Martin McCourt, who over 15 years took Dyson from a UK-only, single product company to a $1bn revenue global corporate with multiple products, present in 40+ markets worldwide and a major player in the US, addressed the room and was kind enough to share his experiences and lessons. Martin then led an excellent discussion with a lot of contribution from the room. A small sample of the messages that came out were:
- There is no one strategy even for one business: Different markets can require different approaches;
- Whatever your strategy, act quickly and mercilessly to address underperformance; and
- Don't be afraid of the competition in a new market fighting back, it proves you are doing something right.
If you are facing this challenge in your business or a portfolio asset please do speak to us. It may be right to sell but it may be that, with the right strategy and investment there is a lot more growth to come.