Transforming a declining business through SaaS and M&A

The decision

After two consecutive years of declining product sales, leadership recognized that the physical disc market was headed toward obsolescence. The company needed to determine how its technology, customer relationships, and financial resources could be redeployed into a more attractive market.

One option was to build a cloud-based storage and file-sharing product that could serve existing customers while opening new markets.

C Squared E analyzed competitors, studied the company’s customer segments, sized potential markets, and looked for difficult file-storage and sharing use cases where large file sizes, security requirements, and weak competition created an opportunity.

From market evidence to a SaaS strategy

The research identified several attractive customer segments and helped guide the product roadmap. C Squared E also supported positioning, pricing, and ongoing customer research as the company developed a cloud offering.

The product ultimately reached beta and was piloted with three existing customers.

At the same time, the competitive research revealed another possibility. Several companies already possessed capabilities that could accelerate the client’s transition to software. With a strong balance sheet, continued profitability, and board support for acquisitions, leadership began considering whether partnering or M&A could provide a faster route into the market.

Expanding the strategy through M&A

C Squared E identified potential acquisition targets and conducted the initial outreach to several companies.

One candidate advanced to a letter of intent. C Squared E supported due diligence, market analysis, financial modeling, synergy assessment, and strategic evaluation. When the seller sought a higher valuation and other terms that made the transaction less attractive, the client walked away.

The search continued with support from a buy-side investment bank. Over the course of the engagement, C Squared E worked closely with management to evaluate candidates, manage the acquisition pipeline, assess strategic and cultural fit, and support the transaction process.

The company ultimately acquired an enterprise video-management software provider whose platform gave organizations a centralized repository for storing, cataloging, managing, and reusing video content.

Results

The acquisition was integrated within approximately 120 days, including preparing the legacy hardware sales organization to identify opportunities and introduce customers to the SaaS offering.

As the acquired platform proved to be the stronger strategic path, the company elected not to commercialize its internally developed cloud beta.

Over an 18-month engagement, C Squared E helped the company move from exploring how to offset decline in its core market to executing a fundamentally different growth strategy—one that ultimately made the acquired SaaS business the foundation of the company’s future.