Opportunity with mostly public sector clients

May 29, 2021

by a searcher in Madrid, Spain

Hi all,

We are negotiating an LOI with a company in Europe whose clients are in the public sector, and it operates through yearly contracts that are won yearly through tenders.

We would like to understand if investors would be worried by this and main concerns to try and address them as soon as possible. We understand that there is obviously some kind of regulatory risk but wanted to understand if there is something more that we should be looking at.

As always many thanks in advance!

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Reply by a searcher
from Birkbeck College, University of London in London, UK

Agree with the point Kelly made as to understanding how contracts are won. Other things to perhaps be mindful of is the dynamics of framework contracts and whether you’re working with them. Your target may have a place in the framework program but how is work in that framework allocated? You might want to understand key criteria contracts are awarded on and think about whether that may limit some of your freedom of action (eg presence in local markets being important to the customer may limit your ability to reduce sites). Without knowing type of service and location it’s difficult to be more specific

Reply by an investor
from Northwestern University in Chicago, IL, USA

I think you need to take time to understand how these contracts are won. There are many public contracts in the U.S. that go to the same vendor year after year as there is often resistance to changing something that is working. Some questions to ask: (1) How often is the company winning the same contracts year over year? (2) What is the success rate on deal bids? (3) How many more of these contracts are out there,i.e., what is the size of the market?

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