Valhalla Partners Due Diligence - Case Study Example

Moreover, since 2002 it has been showing sustainable growth, and according to the projections, TX would achieve more than $50,000,000 million in annual revenue within four years with $5mm incremental profitability. Hence, in immediate future, the company would attain a considerable market position by maintaining an average deal size. The average one-time software revenue per deal point $250,000. Considering all these positive factors, Art Marks should vote to invest in Telco Exchange. As far as the risk factors are concerned, TX is led by a very traditional mode of the management team with a 70-year-old man as the CEO and his son as the CTO.

However, Telco’s highly efficient software would address many of the so-called managerial limitations. Moreover, if Telco Exchange is ready to substitute the CEO with someone proposed by Valhalla, the issue cannot be counted as a constraint to the growth of the firm. As compared to the above stated competitive advantages, threats from competitors and managerial weakness are of little relevance to the investment plan. What Mark should assess more is the firm’s scope for business expansion and customer retention.

Since investment memo evidently indicates the sustainable profitability of TX, Mark can vote to make an investment in this firm. 2. According to the investment memo, the most prevailing risk factor is the upcoming competitors. For instance, companies like Tango, Stonehouse Technologies, Teldata Control, Profile, and QUantumShift are more likely to come up with solutions for invoice processing through their software solutions. Secondly, a more advanced form of products can be expected from vendors who specialize in financial management.

However, the most potent aspect of the TX lies with its ability to address rather basic problems through its integrated solutions which the rivals do not have in common. For example, Aberdeen’s solution tends to narrow its focus on cost management and does not address strategic management. However, it is trying to complete outsourced solutions like dispute resolution services. Finally, as discussed earlier, the company’s mode of management is comparatively unproven and weak. However, this risk factor could be easily overcome once the TX is willing to agree with Valhalla’s proposal.

As compared to other firms’ outsourcing approaches, Telco’s solutions’ direct strategies are highly effective. To be a bit skeptical about the consistency of the firm’s sustainability, one can point out the atypical track record of TX. To illustrate, TX has been seeking a series of financing since its beginning. Moreover, the emergence of the firm itself is strange in its nature. In fact, the company originated as an internal project of CICAT Networks which was also a subsidiary of Fairfax.

However, since Telco Exchange has the provision to help to automate the ordering process, it can make the data available for all parties involved. Hence, TX is highly leveraged with technological backup to meet the required standards of corporate policies. 3. Valhalla’s due diligence process seems brilliant from an investor’s point of view. Its due diligence calls identify the TX’s ability to compete with all other companies with its most integrated telecommunications management solutions.

The diligence process has given higher emphasis on safe investment to ensure partners privileges. The memo clearly indicates the strong and weaker areas of TX along with very reasonable business forecasts.