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Lessons In MSP Mergers, IT Services Acquisitions From A Veteran Buyer

Brookfield’s Abby Warner

We track hundreds of M&A deals involving VARs, MSPs and CSPs each year on ChannelE2E. And we strive to explore the entrepreneur to exit (E2E) journey that many MSP executives have experienced.

Among the key examples: Abby Warner is no stranger to acquisitions. She’s served as COO for The Brookfield Group for three years, and in that time she’s overseen four acquisitions — including 2016’s buyout of Ideacom. “Part of my role and responsibility at the Brookfield Group is not only overseeing our corporate operations but also the integration of our acquisitions as we bring them on,” she tells ChannelE2E.

Looking ahead, Warner says Brookfield’s goal for 2017 is to bring in at least two more companies, but that number could be as high as four before the year is out. Located just North of Indianapolis, Brookfield is a full-service technology company that launched in 1987. From early on Warner says the company was keen to acquire other solutions providers. “We’ve always done acquisitions because we’ve found our model works really well,” she says. “We were one of the early ones in the industry to adopt a recurring service model from a business plan standpoint.” Indeed, Brookfield has leveraged Autotask as part of its recurring revenue and IT services strategy.

Finding The Right Fit

Brookfield participates in multiple associations in which the company serves as a vendor, partner, or subscriber. Through those organizations, Warner says the company’s leadership team makes industry connections. “We’ll start conversations there,” she says.

Through these conversations, Brookfield determines whether a company has any interest in being acquired.

Brookfield also has one person dedicated to scouting the sector, which Warner says serves a dual function. “It helps us both from a marketing and awareness standpoint of seeing who our competition is, but also if there is a potential acquisition for us.”

Dealing With Obstacles

Despite Brookfield’s successful history of acquiring other companies, Warner says that there are always challenges. Every situation is unique, she advises, because each company is different. But in general there tend to be a few common hurdles:

  • Determining the level of excitement from the company and its employees for a new opportunity;
  • helping new employees understand the transition and adapt to a new way of conducting business;
  • negotiations.

Speaking of negotiations, Warner says finding the middle ground between the acquirer and acquiree is important. “The variation between what an owner thinks their company is worth and what it’s actually worth can sometimes be pretty great,” she says. That’s known as the MSP Valuation Gap. But if both sides come to the table ready to talk a deal can usually be reached.

The Process

Warner says Brookfield will usually start talking to a company well in advance of any acquisition. She says it’s usually when an owner is close to retirement that they become amenable to the idea of being acquired.

“Most of them are small to medium sized business and the owners look at their employees as family,” she says. “So they’re in a position where they may be ready to retire, but they want to make sure that their employees are taken care of.”

Warner says it’s important that both companies have similar values when it comes to service level. “It’s really important that we ensure that that company is going to be a cultural fit first before we ever start talking acquisition,” she says.

The timing of the deal varies. The exit strategy can range from one year to five, and Warner says she’s seen deals close in less than 30 days.

Bringing Everyone On Board

Most of the businesses that Brookfield acquires get folded into the company. Employees of a new acquisition are put through an interview process similar to new hires. “Because again, we need to make sure that they’re going to be a positive impact on our operations,” says Warner.

She does advise that if a person doesn’t seem like a good fit, it’s best to cut ties with them. “We had an incident where someone came in, interviewed, and immediately started talking poorly about the previous owner,” she says. “And we just said that’s not the caliber of person we want to have on our team. So we said as a part of this acquisition we won’t be bringing this person on. We won’t be offering them employment.”

Brookfield now boasts 58 employees. They provide solutions for much of the Midwest but also operate in the Seattle area and the Southwestern United States. They also have customers in Canada and parts of the U.K.

No doubt, we’ll be watching closely to see which business the company potentially acquires next.

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