Selling a NetSuite Partner: A Guide for Owners of NetSuite Practices

Oracle NetSuite is sold and implemented through a large network of partners. Some resell subscriptions and implement; others implement, integrate or support NetSuite without reselling; others build SuiteApps that extend the platform. Many of these firms were founded by one or two former NetSuite consultants or employees and have grown into practices with dozens of certified consultants and hundreds of customers. A growing share of them are now being approached by acquirers, and many owners are deciding whether, when and to whom to sell.

This guide is written for owners of NetSuite services businesses: Solution Providers, Alliance Partners, NetSuite-focused consultancies and integration boutiques, and firms that run NetSuite for their clients as managed services or outsourced accounting. Owners of SuiteApp companies should also read our page on SuiteApp M&A, because software is valued differently. Nothing here replaces a reading of your own agreements by counsel; Oracle’s program terms change and the terms of individual partner agreements vary.

What kind of NetSuite business are you selling?

Buyers start by placing a practice in a category, because the category determines who will be interested and how the business will be valued. Most practices are a mix, and the first job in preparing for a sale is to show that mix clearly in the financials.

The distinction between project revenue and recurring revenue matters more than any other. A practice that earns most of its gross profit from new implementations has to win new work every quarter; a practice with a large base of managed-services retainers and renewal-linked revenue has revenue that a buyer can see before it is earned. Buyers pay for visibility.

What buyers look for in a NetSuite practice

Across the transactions we follow in our NetSuite deal tracker, the same handful of questions recur in buyers’ diligence. Answering them before buyers ask is the most effective preparation an owner can do.

• Revenue mix and quality: how much of gross profit comes from implementations, managed services, support, development, SuiteApps and resale margin, and how much of each is contracted.
• Team and certifications: the number of billable consultants, their NetSuite certifications, tenure, compensation and the share of delivery done by employees versus contractors or offshore partners.
• Utilization and realization: billable hours against available hours, and billed rates against standard rates, by consultant and by role.
• Backlog and pipeline: signed but undelivered work, renewals due, and where new work comes from (Oracle sales teams, direct marketing, referrals, existing customers).
• Customer base: number of active NetSuite customers, concentration, industry verticals, and how many customers buy more than one service.
• Oracle standing: partner type and status, tenure in the program, any performance requirements, and the terms of the partner agreement.
• Intellectual property: scripts, SuiteApps, accelerators, templates and integrations the firm owns and reuses, and whether customer contracts grant the firm rights to reuse them.
• Key-person exposure: how much revenue, delivery knowledge and Oracle relationship sits with the founder or one or two senior people.

Preparing two to three years before a sale

Most of what improves the outcome of a sale takes time to build. The work below is worth starting well before a process, because buyers value a track record, not a change made the quarter before marketing begins.

Report revenue and gross profit by stream

Set up the chart of accounts, project codes and time tracking so that revenue, direct cost and gross profit can be reported by stream: implementation, optimization projects, managed services, support, development, SuiteApp subscriptions and resale. Buyers will build this view themselves in diligence if you do not, and their version will be more conservative. Two or three years of history by stream, reconciled to the financial statements, is ideal.

Get revenue recognition and resale accounting right

Resale arrangements raise accounting questions: whether resale revenue is reported gross or net of what is paid for the subscription, when it is recognized, and how renewals and multi-year commitments are treated. Practices that have grown quickly often record these items inconsistently. Ask your CPA to review the treatment, document it, and expect a buyer’s quality of earnings provider to test it. Fixed-fee implementation projects raise similar questions about percentage-of-completion and work in progress.

Move toward contracted recurring revenue

Practices that convert post-go-live customers into managed-services or support retainers tend to be valued more highly, because the revenue is contracted and repeats. If retainers are informal or month-to-month, consider written agreements with clear scope, term and renewal provisions. Do not chase recurring revenue at a loss: buyers look at the gross margin of each retainer.

Build a second layer of management

A practice in which the founder runs sales, the Oracle relationship and the hardest implementations is difficult to buy, because the founder will eventually leave. Promote or hire a delivery leader and a sales or account leader, and let them own outcomes for a period before a sale. Document methodology, estimating and quality-control processes so they live in the firm rather than in individuals.

Clean up contracts and IP

Collect signed master services agreements, statements of work and retainer agreements for every active customer. Check whether they can be assigned and whether they contain change-of-control provisions. Review what the contracts say about ownership of scripts, integrations and other work product, and confirm that employees and contractors have signed invention-assignment and confidentiality agreements. Buyers that intend to reuse your accelerators or bundle your SuiteApps will want clear title.

The Oracle relationship: partner agreement considerations

For most NetSuite practices the relationship with Oracle is one of the most valuable things being sold, and it is governed by an agreement the owner does not control. NetSuite’s partner pages describe several programs: Solution Providers, which sell and deliver NetSuite and provide implementation and ongoing support; Alliance Partners, which work alongside NetSuite’s sales team on consulting, integration and implementation; BPO partners, which provide outsourced accounting on NetSuite; and the SuiteCloud Developer Network for software vendors. Each has its own requirements. We found no partner agreement terms posted publicly, and we do not interpret them; they vary by program and over time. What we can say is which questions to answer, with counsel, before a process begins.

Timing of communication with Oracle is a judgment call. Disclosing a potential sale too early can unsettle a partner manager or a sales team that refers work to you; disclosing too late can leave the parties without a required consent at closing. Most sellers wait until they have a signed letter of intent with a preferred buyer, then approach Oracle with the buyer, with a clear account of what will change and what will not. The purchase agreement should say who is responsible for obtaining any consent and what happens if it is not obtained.

Who buys NetSuite practices

The buyer universe for NetSuite practices has widened. Our deal tracker lists the acquisitions we could verify from public sources, by acquirer type. The categories below describe how each type of buyer typically thinks; individual buyers vary.

Different buyers can arrive at very different prices for the same practice. A platform that already has a large NetSuite bench may value your customer base and vertical expertise; an accounting firm may value your fit with its outsourced accounting clients; a global services firm may value the onshore relationships it can staff from lower-cost delivery centers. A process that reaches several buyer types at once is usually the best way to find out which of them values the business most.

Running the sale process

A sale of a NetSuite practice follows the same broad sequence as any lower-middle-market transaction, with a few sector-specific steps.

Confidentiality is harder in an ecosystem where many people know each other. Consultants talk, Oracle sales teams talk, and competitors are often also potential buyers. Use code names, limit early disclosure to a small group, release sensitive information (customer names, consultant rosters, rates) in stages, and withhold the most sensitive data from competitor buyers until late in the process.

Keeping consultants through a transaction

In a services business the people are the product. A buyer is paying for a team that can deliver NetSuite projects, and the risk that matters most to them is that senior consultants leave after the announcement. Owners who plan for retention get better terms and fewer surprises.

• Decide who needs to know, and when. Usually the senior leadership team is brought in before diligence, and the rest of the firm is told at or shortly before closing.
• Fund a retention pool. Retention bonuses for key consultants, paid over twelve to twenty-four months after closing, are common. Agree in the letter of intent whether the cost sits with the buyer or reduces the seller’s proceeds.
• Consider sharing the outcome. Some owners grant phantom equity or transaction bonuses to long-standing employees before a sale. This works best when put in place well before a process starts.
• Map compensation and benefits. Buyers will compare your pay, bonus plans, remote-work policies and benefits to their own. Differences that look minor on paper can cause departures; raise them early.
• Check restrictive covenants. Know which employees have non-solicitation or confidentiality agreements and whether they are enforceable in their states. Rules on non-competes vary by state and have been changing.
• Give the team a future. Consultants stay when they see better projects, training, certifications and career paths at the buyer. Ask buyers to explain this in management meetings.

Earn-outs, rollover and deal structure

Services businesses are often sold with part of the price deferred and contingent. That is not by itself a sign of a weak offer: earn-outs can bridge a genuine gap between the seller’s view of growth and the buyer’s. The details decide whether the deferred money is ever paid.

Rollover equity is common when the buyer is a PE-backed platform: the seller reinvests part of the proceeds in the platform and participates in its eventual sale. Rollover can be attractive when the platform is well run and growing, but it is an investment in someone else’s business, usually as a minority holder. Ask about the platform’s capital structure, how rollover is valued, what rights minority holders have, and when the sponsor expects to exit.

Owners who will stay with the business should also negotiate their own role: title, reporting line, compensation, authority over their team and the conditions for leaving. A good earn-out with a poorly defined role is a common source of post-closing disputes.

Pre-sale checklist for owners of NetSuite practices

1. Three years of financial statements, reviewed or audited if possible, with revenue and gross profit by stream.
2. A documented revenue recognition policy for implementations, retainers, SuiteApps and resale.
3. A consultant roster with role, tenure, location, employee or contractor status, certifications and compensation.
4. Monthly utilization and realization by consultant for at least the last twelve months.
5. Signed backlog, renewals schedule and pipeline by source.
6. Customer list with revenue by customer and service line for each of the last three years.
7. Signed master services agreements, statements of work and retainer agreements for active customers.
8. Your Oracle partner agreement(s), program status, and a counsel’s summary of assignment, change-of-control and termination provisions.
9. An inventory of intellectual property: scripts, integrations, accelerators and SuiteApps, with evidence of ownership.
10. Employee agreements: offer letters, invention assignment, confidentiality and non-solicitation.
11. A management succession plan showing who leads delivery, sales and the Oracle relationship after closing.
12. A view on your own objectives: price, timing, role after closing, rollover appetite and what matters for your team.