Business Model from M+M Software SE
M+M business model in transition
The M+M business model is based on a mix, composed of self developed software
and the reselling of solutions, mainly from Autodesk, the global CAD market leader. Since 2009 it has been in a transition process, strengthening M+M’s proprietary part on the one hand and reducing the trading component on the other.
Until 2008: Software and Distribution
Since 1984, the year of foundation, M+M acted as a Value Added Distributor (VAD)
for Autodesk software, while continuously increasing the development of our own CAD/CAM solutions, in order to build up an individual market profile and to be clearly distinguishable from the competition.
In this two-segment model, the Distribution volume business naturally dominated group sales, while in the year 2008, the high margin Software segment already contributed nearly half of gross margin and EBITDA, with 210 of the 388 group employees.
In 2008 group gross yield was 25%, EBITDA margin had reached 5.8%, and M+M was in a constant head-to-head race with the Tech Data Group for the title of largest Autodesk Distributor in Europe.
2009: VAD to VAR transition in D/A/CH
In 2009, a third segment ‘VAR Business’ (Value Added Reselling) was formed. In the course of the ‘Market Offensive’, the M+M subsidiaries in Germany, Austria and Switzerland were transitioned from indirect business to direct selling to end customers, and more than a dozen former reselling partners were acquired.
In 2011, the third year after the start, the VAR segment contributed nearly 40% to group gross margin and achieved a positive operating result EBITDA.
Thus the stage was set for completing the VAD/VAR transition groupwide. As a first step, the European Distribution business was sold to the Tech Data Group by the end of October 2011, while M+M kept the subsidiaries in France, Italy, UK, Poland and Romania with approx. 70 of the 113 employees.
Since 2012: VAD to VAR transition in Europe
On this foundation the former Distribution business was restructured to VAR Business, accompanied by selected reselling partner acquisitions (‘Market offensive II’).
Gross yield increased to >50%, more than 10% EBITDA margin achievable
Due to the concentration on the high margin Software and VAR segments, and without the Distribution business, the group gross yield since 2012 is over 50%, representing more than a doubling compared to 2008. The new business model, in the mid term, makes EBITDA margins above 10% achievable.
There is a nearly perfect balance between both segments on gross margin. In addition, the proprietary part of gross margin grew significantly. While the contribution of M+M Software and service had been less than 50% until 2008, it has been around 75% since 2012.