Modelling of Technology Services: A Case Study

Adarma, UK.

Adarma (www.adarma.com), previously known as ECS Security, is one of the largest independent cyber security services companies in the UK, formed and run by veteran senior security leaders with clients across FTSE 350 organisations from all industry sectors.

In 2016 it was ranked as the 40th fastest growing technology firm in the Sunday Times Hiscox Tech Track 100 league.

Adarma’s clients are successful FTSE 350 organisations that are looking for integrated, sustainable solutions that bring value through a partnership approach to threat management, but that recognise they have limited time, scarce resources & retaining experience.

Investment: £50m

THE STORY

In 2019, Livingbridge, the independent private-equity firm, invests in Adarma.  As at October 2020, Adarma has reported a record year, with revenues rising 27 per cent to £41 million, the seventh year in a row of consecutive double-digit growth.

Headcount at Adarma has also continued to grow to support both client delivery and innovation, with permanent staff numbers for 2019 totalling 237, compared to 171 in the previous year.

In 2020 a new CEO joined the company with the express mission of building a business of real scale in the growing cyber security market.

www.livingbridge.com/investment/adarma

THE CHALLENGE

Post-acquisition, the challenge facing Adarma and the new shareholders was manyfold.

Adarma has a dated revenue and cost centre structure, that clearly requires reorganising to understand the allocation of value in the business.

Partly due to the acquisition and partly due to the nature of a fast-growing company, Adarma lacks a cash flow forecast, needed to service the new shareholders and lenders.

The operational reorganisation and the new financing and ownership structure necessitate a further allocation of responsibility internally and externally.

Adarma is not able to formulate a medium-term or long-term strategic plan because the overall picture is unclear, while the acquisition price needs to be referenced by an enterprise valuation agreed between the stakeholders.

THE SOLUTION

Lazuli specifies and builds a private equity model for Adarma.

THE RESULTS

The model brings together the new operational structure, the financing requirements, and the strategic value-creating plan, all within a common agreed language and enterprise valuation.

The new model also creates a common vocabulary for efficient communication both internally and externally with investors, shareholders and lenders, giving Adarma the time and clarity to agree a value-creating plan with the new owners.

The model build process gives Adarma the opportunity to re-allocate responsibility internally.  This process is by no means instant, but rather an evolution that will enable Adarma to invest in people for better long-term relationships with investors, shareholders, and lenders.

The model also allows Adarma to formulate a strategic vision for the enterprise, through use of the long term forecast and in conjunction with the external stakeholders.  The agreed enterprise valuation is the ultimate gauge of the efficiency of the strategic vision.