Mergers and Acquisitions

From Networking to Acquisition: How Ntiva Integrates New MSPs

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For most MSP owners, deciding who to sell your business to is just as important as deciding when to sell. 

Mergers and acquisitions (M&A) activity within the managed services provider (MSP) industry has been rampant for years. Attracted by recurring revenue, technological advances, and the inherent cybersecurity challenges that face any modern business, institutional investors have been snapping up MSPs.

In fact, M&A activity within the channel is expected to grow 50% in 2024 – a level on track to meet the hot streak of 2021/2022, which saw nearly 2000 deals, as reported by ChannelE2E. Those statistics are according to Jay McBain, chief analyst of channels, partnerships and ecosystems at Canalys.

In 2023, the global MSP market size was estimated to be $299 billion, and is projected to grow at a CAGR (compound annual growth rate) of 12.8% in the U.S. by 2030 and 13.6% globally through 2030, according to Grand View Research

Against this background, there has been a growing emergence of platform MSPs – managed services providers who acquire smaller MSPs to increase their geographic reach, talent pool, services offered, and revenue. It’s a trend that has reshaped the competitive landscape for MSPs, but also presents opportunities for MSP owners thinking about selling their businesses.

Joanna Mirov was one of these MSP owners.

Mirov owned MXOTech, a Chicago-based MSP that was doing well, with $8 million in revenue and a strong focus on both IT managed services and software development. Despite the company’s success, Mirov was intrigued by the trend of M&A owners selling their companies and began to investigate.

"I wasn't necessarily looking to sell at first," Mirov explained to ChannelE2E. "But as I saw my peers moving in that direction, I realized it might be the right time to explore my options and see what was out there."

It was during this exploration that Ntiva caught her attention.

Ntiva, a platform MSP, began expanding through acquisitions in 2017 after securing private equity backing. Ntiva’s M&A process aims to maintain service quality and client relationships while leveraging Ntiva’s broader resources and expertise.

Like many platform MSPs, an important aspect of Ntiva’s strategy is its emphasis on cultural fit and building trust. According to Christopher Vollmond-Carstens, Ntiva’s chief M&A officer, the company prioritizes building a strong rapport with potential acquisition targets before finalizing any deals. 

"You've got to establish the connection, build a foundation for trust, rapport, etc., before you can really start to contemplate bringing two organizations together, or bringing your life's work into another organization," Vollmond-Carstens explained to ChannelE2E.

This approach ensures that the merging entities share similar values and business philosophies, according to Vollmond-Carstens. 

Understanding PSP Partners

Ntiva is backed by private equity firm PSP Partners, a Chicago-based family office investment firm led by Penny Pritzker, the former U.S. Secretary of Commerce. The firm focuses on long-term investments, partnering with companies to support sustainable growth and development.

PSP Partners’ key areas of focus include business services, industrial growth, consumer products, and healthcare. By investing in these sectors, PSP Partners aims to support companies that provide essential services, have strong market potential, and aim to improve outcomes.

The firm invests in various sectors, including business services, industrial growth, consumer products, and healthcare. Its investment philosophy is centered on supporting companies that provide essential services and have strong market potential.

In its partnership with Ntiva, PSP Partners provides financial resources and strategic support, facilitating Ntiva’s acquisition strategy. This backing helps Ntiva expand its geographic reach, enhance service offerings, and integrate acquired companies effectively.

Ntiva’s Approach To Acquisitions

The traditional approach for finding MSPs ripe for acquisition is through business brokers. 

Ntiva’s method for identifying and approaching potential acquisitions is more focused on a combination of industry networking, referrals, and strategic outreach. Ntiva first found Mirov’s business through a referral. 

Mirov said she has always been proactive about networking within the industry. She regularly attended industry events and built relationships with peers, competitors, and other professionals in the field. It was through one of these connections that she came into contact with Ntiva.

"I met Ntiva because I've always enjoyed networking with people including my competitors," Mirov explained. "One of my competitors, Steve Banke, had sold his business to Ntiva and introduced me to Steven Freidkin."

This introduction marked the beginning of a series of conversations between Mirov and Ntiva. These initial interactions were not focused on immediate business transactions but rather on understanding each other’s values, visions, and operational philosophies. Ntiva’s emphasis on cultural alignment and building trust became evident during these discussions, according to Mirov.

This relational groundwork is crucial, according to Vollmond-Carstens. The company prioritizes getting to know potential acquisition targets personally and professionally to ensure a good fit. This involves multiple meetings, extensive dialogue, and a genuine effort to understand the values and operational philosophies of the target company.

"It really starts for us significantly prior to that to get to know the individual organization, etc., before we ultimately embark on any possible transaction," Vollmond-Carstens said.

When evaluating potential acquisitions, Ntiva looks at several key criteria. Financial stability and growth potential are fundamental, but the cultural fit remains the most important. The company assesses the revenue mix, client base, geographical location, and service offerings of the MSP to ensure they complement Ntiva's existing operations. Additionally, the company values MSPs that have a high percentage of recurring revenue, which aligns with Ntiva’s business model.

Ntiva also considers the motivations of the MSP owners and their plans post-acquisition. Whether the owners intend to stay on in some capacity or retire, Ntiva looks to accommodate their goals, ensuring a smooth transition and integration process, according to Vollmond-Carstens.

The Acquisition Process

Ntiva’s approach to acquisitions begins long before any formal transaction discussions. The process is thorough, ensuring both financial viability and cultural alignment.

Step One: Initial Contact

Once a potential MSP is identified, the initial contact is usually made through an introduction or a direct outreach effort, according to Vollmond-Carstens. This phase is all about getting to know each other. Ntiva prioritizes building a relationship and understanding the target company’s values, vision, and business operations.

Step Two: Building Trust and Rapport

Before any formal discussions take place, Ntiva focuses on establishing a strong rapport with the target company. This involves multiple meetings and extensive dialogue to ensure both parties are comfortable with each other.

Step Three: Preliminary Evaluation

During the preliminary evaluation phase, Ntiva conducts an initial assessment of the target company’s financial health, operational structure, and market position. This includes a high-level review of financial statements, client base, revenue mix, and service offerings. The goal is to determine if the company is a good fit for Ntiva’s strategic objectives.

Step Four: Letter of Intent (LOI)

If the preliminary evaluation is positive, Ntiva presents a Letter of Intent (LOI) to the target company. The LOI outlines the proposed terms of the acquisition, including the purchase price and any contingencies. This document serves as a formal but non-binding agreement to proceed with more detailed due diligence.

Step Five: Due Diligence

During due diligence, Ntiva thoroughly examines the target company’s financial records, contracts, client relationships, and operational processes. Ntiva also assesses cultural fit by meeting key staff and reviewing policies.

Step Six: Final Agreement and Closing

After resolving due diligence issues, Ntiva and the target company finalize and sign the acquisition terms. The deal is closed, the company is rebranded under Ntiva, and the integration process begins.

Step Seven: Integration

Ntiva aligns the acquired company with its operational standards and culture. This includes integrating IT systems, standardizing processes, and supporting staff training. They ensure a smooth transition for employees and clients, maintaining service continuity throughout the process.

Ntiva also looks to maintain continuity of service for the acquired company’s clients, ensuring that there is no disruption to their service during the integration process, according to Vollmond-Carstens.

"It was successful for me because I figured the money was going to be there...but the more important thing for me was to make sure that everything else besides money had alignment," Mirov said, reflecting on her own experience selling to Ntiva.

Post-Acquisition Integration

Ntiva's approach to integrating new acquisitions focuses on several key areas: Branding, staff integration, and client retention.

"Once businesses do come on board, we do fully integrate those businesses that include the brand," Vollmond-Carstens explained. This rebranding process aligns the acquired company with Ntiva's identity, ensuring a unified market presence, he said.

For staff integration, Ntiva collaborates with the acquired company's employees to place them in roles within the larger organization. This process involves assessing individual strengths and matching them with Ntiva's needs. Some original MSP owners, like Mirov, choose to remain with Ntiva in new roles. "I am working with [Vollmond-Carstens] as the senior M&A advisor, and so my role is to talk to other MSP CEOs like me," Mirov said.

Client retention is crucial during the integration process, according to Vollmond-Carstens. Ntiva works to maintain service quality and customer satisfaction by aligning the acquired company's operations with their standards. This includes integrating IT systems, standardizing processes, and providing staff training and support. The aim is to ensure clients experience a smooth transition without service disruptions.

Ntiva’s Cybersecurity Strategy

Ntiva’s cybersecurity strategy is a key component of its operations and its M&A plays, addressing critical needs in the MSP landscape. 

The company maintains an in-house cybersecurity team, which provides comprehensive cybersecurity services, including threat detection, incident response, and compliance management, according to Vollmond-Carstens.

"We have a pretty robust cybersecurity outfit within the organization, including a CIO as well as the team under that individual," he explained.

The integration of Ntiva’s cybersecurity resources benefits acquired companies by providing enhanced protection and reducing the burden on smaller organizations. It also has the added benefit of cutting rising cybersecurity insurance costs, according to Vollmond-Carstens. 

"Cybersecurity insurance is becoming increasingly more expensive year after year, and that's a significant hit to profitability of a smaller organization,” he explained. “But becoming part of a bigger outfit like Ntiva, that’s basically taken off your plate."

Ntiva offers specific cybersecurity services such as network security, data encryption, and regular security assessments. These measures ensure that the acquired companies can remain compliant while enhancing their protection against cyber threats.

The Broader Implications of Ntiva’s Approach

According to Vollmond-Carstens, one of the main challenges Ntiva faces is merging different company cultures and operational systems. Ntiva addresses this by building trust and rapport with potential acquisition targets early in the process. 

"We want to be in a position where we strive to provide better than ordinary financial results for all stakeholders. And I say stakeholders, not just shareholders," said Vollmond-Carstens. 

"It's about employees and providing them growth and development opportunities to increase their compensation and their responsibilities as they grow and develop the business. It's about  being the most constructive partner to vendors because we can do fantastic things together to provide infinitely better services to our clients. It's for clients to be able to see new value off of the services and the expertise and insights that we're providing to them."

The company recently acquired fellow platform MSP the Purple Guys for an undisclosed sum. The deal was notable for the fact that both companies have been actively growing through acquisitions. In the past seven years alone, Ntiva completed 14 acquisitions, while the Purple Guys had done 10 of their own. The acquisition of the Purple Guys marks the 25th collective acquisition between the two organizations.

Looking forward, Ntiva doesn’t have any exit plans of its own in the immediate future. The company instead plans to continue its growth both organically and through acquisitions. 

"We intend to continue to grow substantially,” Vollmond-Carstens said. “There's tremendous opportunity here stateside.  That's where our focus lies as far as any sort of transition for our business. We recognize that our current ownership is not one to forever hold our business. We knew that going in. So at some point in time, it will be the appropriate time to think about who will be our next partner, our next sponsor, to help continue to serve our underlying goals to grow expansively as a business”

Ntiva’s acquisition strategy focuses on cultural fit, comprehensive due diligence, and smooth integration, positioning it as a key player in the MSP acquisition landscape. This approach addresses the complexities of merging different organizational cultures and operational systems, it’s also what ultimately attracted Mirov to sell her company. 

"I am the second largest investor at Ntiva. I put a little bit of my money into it," Joanna Mirov said. 

Looking ahead, the future of MSP acquisitions will likely see continued growth and consolidation, with companies like Ntiva playing a crucial role in shaping the industry’s direction.