Synergy Associates is an international managed services provider, specialising in IT for the commercial art space, financial services and law firms.
The company was founded in 2006 by current managing director Alex Caplan. At the time, he was managing and administrating a large, complex, international IT infrastructure for the investment bank Lehman Brothers. Alex saw a gap in the market to provide enterprise-level IT support to smaller businesses.
He says: “I was looking after huge server farms running an array of mission-critical applications over a number of different time zones. I became aware that the SME-end of the market had no less important needs from their IT infrastructure but without the resources at their disposal. I had a broad experience and knowledge of delivering such services and that’s exactly what I focused on providing.”
In April 2008, Caplan cut his ties with Lehman to focus full-time on Synergy from offices in Marble Arch, London. After some early success in the fine arts arena, the company now provides IT support services to some of the sector’s major players with 35 customers in the ‘top-end’ of the market. The company has offices in London, Hong Kong (2009) and New York (2017) and manages IT operations for clients around the world.
Synergy’s proposition of providing enterprise-class technology support has helped establish itself as the ‘go to’ IT provider for many of the creative industries, including a growing list of high-end art galleries.
“We are never going to be the cheapest, but our focus on providing a quality service has meant that we are now one of the best. Our attention to detail such as providing aesthetically focused IT has paid dividends and enabled us to branch out and also gain traction in fashion and retail. Our London staff, for example, are no more than a 15-minute walk from their customers’ offices and means we can offer a very different kind of personalised service,” explains Caplan.
Synergy was first approached by Evolution Capital a couple years ago, which led to a continuing rolling engagement. Despite being a growing and profitable business, the management team were becoming increasingly stretched with an over-reliance on their managing director.
Although it had acquired an impressive entrepreneurial reputation and enviable customer retention record, it was facing a few challenges: The management team lacked sales expertise and there was no financial director, which was preventing the company from achieving any quantum of growth. Synergy needed to transition itself from being an owner-managed micro-business to one that could achieve sustainable growth. There had also been a number of attempts to acquire other business, but these all ended inconclusively.
Alex Caplan adds: “We really needed to understand what the potential of the business was. Having grown it from nothing, I needed some heavyweight financial and commercial input to understand its prospects. I wanted to create an organisation that could attain the maximum valuation but did not know how to go about it.”
Advice, planning and preparation:
Evolution Capital kick-started a highly collaborative strategic review process with Synergy, focusing on financial, budgetary, and sales processes. The review was to include an indicative valuation and an assessment of the strategic options open to the company. Its purpose was to provide support to its owners in preparation for the next stage of development.
Caplan adds: “We also needed to understand the addressable areas of our business and from there take affirmative action. Our market was continuing to grow and acquisition opportunities were starting to present themselves but we had no idea of how to capitalise on them. We needed both a strategy and some fundamental business changes. Evolution Capital helped us to focus on what we needed to do and when we needed to do it. They delivered exactly what they said they would do.”
The strategic review included:
- A detailed list of recommendations and proposed changes to many of the business fundamentals
- An anticipated valuation after implementing the recommendations
- An acquisition strategy and process going forward
Maximising the value through business change:
The Evolution Capital team presented Synergy with a detailed strategic review analysing each of the component parts of the business and where change was necessary, including proposed resourcing solutions and recommendations for a sales plan. A number of tangible benefits were delivered including:
- An increased valuation multiple of between 3-4 times on an adjusted EBITDA (up from 1 -1.5 multiple)
- A full board complemented by Evolution Capital providing a finance director and sales director
- The creation and delivery of a bespoke digital dashboard provided dynamic management and financial information
- Ongoing stability based on recurring revenue
Alex Caplan said: “From the moment the strategic review was delivered, through continuing implementation, we have been given excellent support by the Evolution Capital team. The expertise and input provided by our new board members have delivered many benefits and it is very reassuring to get expert advice and guidance. I feel that we have a clear plan going forward and I am very comfortable with the direction the company is now taking.”
A successful outcome:
After delivering the review and helping implement its recommendations, Evolution Capital moved onto the next part of the engagement and is working with Synergy to deliver suitable acquisition targets as well as providing ongoing support on a regular basis.
“We are very pleased with our partnership with Evolution Capital. In hindsight I might have done a few things differently when we first started, such as focussing on our sales process earlier. I would definitely have engaged a qualified business advisor sooner rather than later.”