According to our 36th Annual Dealer Survey, only 12% of dealers built their managed IT business through acquisition while 61% have built their own and 27% have partnered. Some dealers have used a combination of the three. With organizations such as Visual Edge IT and others acquiring IT companies, an acquisition could become a more favorable route to building or expanding an IT business in the future. With that in mind, a panel of IT experts offered their recommendations on the criteria dealers should consider when evaluating a potential IT acquisition.
“When looking at acquisitions, you want to ensure that the company you’d be acquiring has a similar business plan as yours and that your technology stacks and services offered are compatible. Review the company’s current client base to ensure they are the type and size of client that will fit into your current offering. Make sure you have qualified staff who can handle the additional client support that will come along with the acquisition and provide opportunities for training and development for your employees to take the extra work.” Juleen Bixler, senior director of operations, Fraser Advanced Information Systems
“If you are a copier dealer looking to acquire a managed IT services business, look for opportunities to grow within their customer base with services you already sell, such as copiers, printers, and managed print.” Melissa Confalone, vice president of sales, Fraser Advanced Information Systems
“If you’re a true managed service provider trying to buy a small MSP, it’s very hard to make that profitable and make it work. You have culture clash, you have value proposition clash, you probably have contractual differences. It’s a different mind focus on how the program works. And then, what are the core values around that? It’s tough to do acquisitions. For dealers that are starting out, that’s a rough road. I would strongly encourage people to invest in starting small and growing a team that understands your business versus trying to buy one and incorporate it, because you don’t know the space that you’re getting into and now you’re buying a company that’s used to operating the way they operate. You’re going to try to have influence, and that’s tough.” Patrick Layton, vice president, managed IT services, Impact Networking
“Culture and acquiring the people are the key to a successful acquisition. Usually, IT companies do not have a lot of clients, so the ownership team’s intellectual property is very important.” Anthony Sci, president and CEO, Keypoint Intelligence
“There are a host of measures similar to what you are accustomed to in the traditional business. You look at revenue/endpoint and client, gross profit, EBITDA earnings before interest, taxes, depreciation, and amortization), and the customary measures. Places to pay close attention are cultural fit and contract type, and that revenues and profits are not highly dependent on just a few clients. Last word on this topic: Do not buy a fixer-upper. You probably don’t have the expertise to fix it.” John Schweizer, vice president of channel sales, ConnectWise
“Copier dealers who are new to IT and just starting down this path should only buy a high- performing, high OML company [Editor’s Note: This stands for Operational Maturity Level, a term coined by Service Leadership]. More copier-dealer owners are looking to buy knowledge and avoid acquiring a poor performing, low OML IT company, as they acknowledge they don’t have the expertise needed to mature effectively. They will pay more because multiples are at peak levels now, but it is the best way to ensure success as opposed to buying a fixer-upper. That’s not to say I haven’t seen copier companies with solid IT practices in place successfully buying and growing fixer-uppers.” Greg VanDeWalker, senior vice president, IT channel and services, GreatAmerica Financial Services and Collabrance LLC
Access Related Content
To become a subscriber, visit www.thecannatareport.com/register or contact cjcannata@cannatareport.com directly. Bulk subscription rates are also available.
