Growth - Organic v Acquisition
Organic growth in the channel has become harder. Customer acquisition costs are rising, competition is intense, and many traditional revenue streams—voice in particular—are in long-term decline. Against that backdrop, M&A has become an increasingly attractive route to accelerate growth, add new capabilities and improve earnings quality.
For many channel businesses, acquisitions are less about scale for scale’s sake and more about acquiring capabilities. Buying expertise in areas such as cloud, security, mobile data, IoT, or managed services can be faster, and lower risk, than building those capabilities internally. M&A can also provide access to new customer segments, vertical specialisms, or geographic reach that would otherwise take years to develop.
There is also a strong valuation driver. Recurring, sticky revenues with low churn and strong gross margins continue to command higher multiples. Acquiring businesses with these characteristics can materially improve the group’s blended valuation profile.
Mergers and Acquisitions
The UK channel is becoming more polarised. At one end, we’re seeing the rise of larger, well-capitalised platforms backed by private equity or institutional investors. These platforms are increasingly sophisticated in integrating acquisitions, centralising back-office functions, and cross-selling services across an expanded customer base.
At the other end, smaller independent resellers are under pressure. Some will continue to thrive by specialising, but many are approaching a natural inflection point where succession planning, funding constraints or competitive intensity push them towards a sale.
One noticeable change is that buyers are becoming more selective. Revenue alone is no longer sufficient. Acquirers are scrutinising revenue quality, customer concentration, contract structure, churn, and margin sustainability. Businesses overly dependent on legacy products are finding the market tougher, while those aligned with growth areas such as mobile data, IoT and managed services are in high demand.
Preparing to sell
Preparation should start well before any formal sale process. The most successful transactions are those where management teams treat “exit readiness” as an ongoing discipline rather than a last-minute exercise.
Key areas to focus on include:
- Clean, credible financials with clear separation between recurring and non-recurring revenue.
- Strong documentation around customer contracts, pricing structures and renewal terms.
- Demonstrable customer retention and low churn.
- A management team that can articulate a clear growth narrative beyond the founder.
- Systems and processes that scale, rather than relying on individual heroics.
Importantly, businesses should also be honest about what makes them distinctive. Buyers pay premiums for clarity—whether that’s vertical focus, technical capability, or a differentiated go-to-market approach.
Key questions
Choosing the right advisor can materially affect both outcome and experience. Some critical questions to ask include:
- Do they have direct experience in the telecoms and IT channel, or are they generalists?
- Can they demonstrate a track record of completed transactions, not just mandates won?
- How well do they understand valuation drivers specific to recurring revenue models?
- Will senior partners remain actively involved, or will execution be delegated?
- Are their incentives aligned with achieving the right deal, not just any deal?
Cultural fit also matters. A transaction is an intense, often emotional process, and having an advisor who understands the dynamics of founder-led businesses is invaluable.
Predictions
M&A activity in 2026 is likely to remain robust, but increasingly valuation-driven by technology mix rather than headline revenue growth. One of the clearest trends we’re seeing is that businesses aligned to IoT, mobile data and cybersecurity are commanding materially higher multiples than those built primarily on legacy connectivity.
There is good evidence for this. Across UK and European transactions over the past two years, businesses with a high proportion of IoT, M2M or security-led recurring revenue have consistently traded at premium EBITDA multiples compared to traditional voice-centric resellers. Analysts and investors typically cite several reasons for this: lower churn, longer contract durations, deeper technical integration into customer operations, and a stronger role in mission-critical services.
IoT connectivity in particular has shifted from being viewed as a niche add-on to a core infrastructure layer. SIM-based solutions supporting CCTV, transport, utilities, healthcare and industrial monitoring are highly sticky, often embedded for many years, and difficult to displace. That stickiness translates directly into higher confidence in future cashflows, which is ultimately what drives valuation.
Cybersecurity shows a similar dynamic. Channel businesses with managed security services, compliance-driven offerings, or proprietary IP tend to benefit from stronger gross margins and recurring revenue profiles. As regulatory pressure increases and cyber risk becomes a board-level issue for end customers, buyers are willing to pay more for businesses that sit closer to that value chain.
Looking ahead, we expect valuation dispersion to widen further in 2026. Businesses with meaningful exposure to IoT, mobile data and cybersecurity are likely to see continued strong demand from both private equity and strategic acquirers. By contrast, companies heavily weighted towards declining or commoditised services may find that buyer appetite becomes more selective, even if overall M&A volumes remain healthy.
For channel leaders, the implication is clear: technology mix, revenue quality and strategic relevance will matter more than ever—not just scale.
About Jola
Jola is an award-winning, supplier of business communications, specialising in mobile data SIMs. Jola sells on a wholesale basis to MSPs, ISPs, IT support companies and telecommunications resellers. These channel partners supply solutions to public sector organisations and enterprises worldwide.
To find out more about partnering with Jola, request our partner pack.
