Is Private Equity Good or Bad for MSP Software Companies?

When Avast acquired AVG Technologies today, the power broker behind the deal was CVC Capital Partners -- a private equity form that owns Avast.

The deal marks the latest example of a private equity firm gaining control of MSP-centric software -- this time, AVG's Managed Workplace, an RMM (remote monitoring and management) software platform.

Other examples of MSP software companies with private equity owners include:

Autotask Corp.: Acquired by Vista Equity Partners in 2014. The deal gave Autotask a war chest to acquire RMM and file sync/sharing software. The new ownership also helped Autotask to accelerate its international strategy -- including localized software and expansion across Europe and Australia, among other regions.

Continuum: Acquired by Summit Partners in 2011. The deal allowed Continuum to hire a new executive management team while overhauling its RMM and NOC (network operations center) platforms. It also allowed Continuum to acquire BDR technology. The results: Sources say Continuum grew nearly 40 percent in 2015 vs. 2014, though the company declined to comment on the estimate.

Kaseya: Acquired by Insight Venture Partners in 2013. The deal got off to a rocky start amid executive changes and competing priorities involving direct midmarket sales, MSP sales and multiple software product lines that Kaseya had acquired ahead of the deal. A CEO change in 2015 restored focus to the company, and a niche PSA platform acquisition in early 2016 certainly is intriguing. Still, Kaseya has spent recent months verbally attacking rivals across public forums -- a strange tactic considering the company spent much of 2014 an 2015 in catch-up mode and working overtime to regain MSP trust.

SolarWinds: Acquired by Silver Lake and Thoma Bravo in February 2016. SolarWinds itself acquired N-able Technologies in 2013. That deal has performed very well, and allowed N-able to acquire ticket management and remote control technologies. Fast forward to 2016, and private equity backing has allowed SolarWinds to purchase LogicNow. The combined N-able/LogicNow installed base spans 20,000 MSPs. Although there is some overlap on the RMM front, the new SolarWinds MSP division (which includes N-able an LogicNow) will likely extend a range of SolarWinds tools (including Application Performance Management) into the MSP sector.

StorageCraft: Acquired by TA Associates in January 2016, the deal opened the door for new CEO leadership and new channel initiatives. The moves won't end there. Keep a close eye on StorageCraft's plans for Microsoft Worldwide Partner Conference 2016, where the business continuity and backup company may unveil some major updates...

PS: Whom did I miss on the list of MSP software companies that are private equity owned?

Private Equity Ownership and MSP Software: Good or Bad?

As the examples above show, private equity ownership often helps MSP software companies to hire new executive leadership and make acquisitions.

Most of the examples above have had reasonably good to very good outcomes (at least so far). Still, I don't view private equity ownership as "all good" or "all bad." And certainly, it doesn't take private equity dollars to grow an MSP software company. Examples: ConnectWise, which remains in growth mode and is self-funded. And Datto, which leaned toward venture capital, maintained profitability even when the VC dollars arrived.

It will take a bit more time to determine the overall success rates of additional deals. It has only been a few months since private equity firms acquired SolarWinds, and now SolarWinds must prove that it can manage the recent LogicNow buyout (though the earlier N-able buyout has performed very well).

CVC's decision to combine AVG with Avast, announced today, also warrants scrutiny. Most of the news surrounding the deal focuses on security opportunities. The initial announcement didn't mention channel or MSP opportunities -- though those details certainly could emerge in the days and weeks ahead.

We're also watching Kaseya closely. The deal stumbled out of the gate but replacement CEO Fred Voccola righted the ship quite a bit in 2015 -- restoring an all-in focus on MSPs and overhauling partner support as well. MSPs welcomed the moves. Fast forward to present day, and some MSPs are concerned that Voccola has spent recent weeks alleging weaknesses at rival MSP software companies. Those same MSPs hope Kaseya itself is focused like a laser on its own R&D.

Ironically, today marks one-year since Kaseya publicly confirmed Voccola as CEO. We'll check in with him soon for milestones, and thoughts on the PE market...

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.