Cloud-based networking, communications, and cyber-security solutions expert Datrix was acquired by AdEPT Technology Group in April 2021. Evolution Capital talks to Mahmood Chaudhri about the motivations, lessons and key factors that enabled his successful outcome.
EC: “Why did you start Datrix and what was your mission?”
MC: I started Datrix out of frustration really. The organisation I was working for in my 20’s seemed to care less about our customers than I did, and I felt that with the right team around me I could offer a much better experience for our customers. Consequently, I left and founded Datrix. So, 27 years later I am here, having achieved the outcome that I always wanted for myself.
EC: How has the market changed since you founded Datrix and have you adapted your strategy to respond to the changing landscape?
In the early days of 1994, we were selling computers and peripherals through magazines. The technology was moving at quite a pace and taking huge leaps every few years. We were supplying leading-edge solutions across several private and public sectors. This required us keeping abreast of relevant technologies and entering new areas. For example, we worked in data centres with cloud provision and SaaS related solutions very early on which meant we had to punch well above our weight. We still must maintain that leadership position as the landscape is constantly changing and highly dynamic. Companies wanting to emulate our success have to find their ‘sweet spot’. Today, there is not a single IT supplier that has solutions to fit all requirements. It is essential to find the customers that are right for you, not just the other way around.
EC: What is unique about Datrix?
Datrix has been a privately-owned business for over 25 years and most of our customers have been with us for well over 10 years. We work in several private and public sectors; however, our core focus is on healthcare. We have an extensive healthcare property portfolio across the whole of the UK and provide enterprise technology solutions on a 24/7/365 basis. This means that the barrier to entry for competitive organisations is high which by default significantly reduces quality competition.
EC: What was your first experience of Evolution Capital and how would you rate their performance in the process?
Datrix was first contacted by Evolution Capital in 2016 and they have kept in touch ever since. Recently they came to us when we were ready to sell - representing a potential buyer. Their overall attitude and demeanor when I met them was completely different from other similar organisations that had contacted me, and they instantly got my undivided attention. They demonstrated a clear understanding of our requirements and articulated a pragmatic way forward. Evolution Capital’s proposition was compelling enough for me to proceed, and I presented it to Datrix’s advisors. The rest, as they say is history..!!
EC: Why was AdEPT a good fit for Datrix?
I have come across many organisations over the years that have seen Datrix as a good fit, but the timing, business culture and synergies with any of them was questionable. It was never enough to persuade me to sell my business to any of them. Evolution Capital’s initial presentation of AdEPT together with all the associated benefits and deliverables was accurate and compelling and guided us toward making the right decision. Meeting the Chairman, CEO & FD of AdEPT was enough to convince me and my team at Datrix that this was a perfect fit.
EC: What do you believe were the key factors in achieving a successful outcome for the shareholders?
I have always retained the majority shareholding at Datrix, which actually shrunk from 75% to 55% over the years as I rewarded and incentivised key members of my management team and staff. My advice to any business owner wanting to achieve a successful outcome would be this, “If you can’t achieve the outcome you want by yourself, bring people into your business on a healthy salary and also offer them a stake in the game. Give up some of your shares for that purpose or privilege.”
The other shareholders, of course, needed the right financial outcome, but most importantly I wanted a good cultural fit with the new owner. They would need to share my drive and ambition to offer leading edge technology to their customers and to develop a bigger enterprise client base. It was also important that most of the other shareholders at Datrix retained senior positions as part of the new AdEPT management team.
EC: What has the process taught you and what would your advice be to owners considering selling their business?
I wish someone who had been through my recent learning curve had knocked on my door and advised me 15 years ago; I could so easily have prepared myself for a sale of the business then. But the only value in speaking with anyone is if they have actually gone through the experience of selling a business themselves. Attending seminars and reading relevant articles and books is of help, but there is nothing like going through the process personally and taking listening to the advice of people who have. Importantly, owners selling their business need to engage with organisations like Evolution Capital, who will give them essential advice. They will guide them through the process in an honest, credible, and professional manner and without the agony that often accompanies a business disposal.
EC: What do you see as the biggest challenges in the industry right now?
IT businesses need to accelerate their adaption and adoption of SaaS and cloud services. Additionally, there are an increasing number of cyber-attacks threatening our industry and suppliers need to be agile and proactive in their approach. Continual and ongoing education of staff and customers about cyberthreats is also key. Organisations need to be cognisant of their budgetary constraints in order to keep pace with deploying automated technology and they have to make sure they have vital IT talent available to them. On the commercial side, I believe that every serious supplier should adopt a strong, recurring revenue model as their main source of income. This will ensure resilience in hard times and makes them attractive to investors and acquirers alike.
EC: What is next for Mahmood?
My priority now is to complete a successful earn-out period and add value to the transitionary process. However, in the background, and for several months now I have been taking advice from several coaches to help me answer this exact question in both my working and personal life. Specifically, I am fascinated by the sales process of business disposals and the required preparation for success. I have developed numerous contacts during my career and particularly over the last 6 months and am investigating several options already. I am also investing in businesses, new and established, with a view to achieving substantial growth and value creation.
My biggest take-away is that I do not believe you need 25 years to make your business ready for sale. Why wait? The years pass by very quickly, so do not waste them. Just engage with the right people, advisors, and organisations to guide you through the process.