In an email interview (further below), ChannelE2E and Fowler explore what pulled together the four MSPs, how Iconic IT will be organized upon launch, and where the company will focus its business efforts with customers.
For those who missed the breaking M&A story earlier this week, the four MSPs involved are:
Fowler: We wanted to merge the four companies first to build a solid foundation with our combined resources. Once the foundation is set, it will be easier to add MSPs to the Iconic IT family to create a world class customer service company that has national reach with a local feel. And to provide new opportunities to our employees.
Initially we are focused on a smooth transition for our employees. Benefits, pay cycles, handbooks all look a little different now. In a few months we will begin focusing on improvement of the client experience. We have several initiatives that range from consolidating our systems and reporting to streamlining behind-the-scenes proactive services. Towards the end of 2019 we will focus on strengthening our relationship with key partners/vendors.
ChannelE2E: How long have the business owners known each other?
Fowler: We met in February 2014. We had just joined a new HTG peer group (HTG is now ConnectWise IT Nation Evolve). Our group had 11 members that would meet for two days each quarter in different cities. We also broke into sub-groups, that we call microboards, and we would meet via video-conference bi-weekly to help each other with issues. Microboard 1, or MB1 for short, included 5 companies. Four of those now make up Iconic IT.
For over four years we have interacted, shared best practices, coached each other and built strong friendships based upon mutual respect.
ChannelE2E: When did the business owners begin to brainstorm a possible combination of the companies?
Fowler: The idea was floated in September 2018 due to all of the M&A calls and offers we were getting. In November 2018 we decided to meet in Detroit. This is where the potential benefits and goals were discussed and we adopted the phrase “better together.” We agreed that we wanted more information to make a decision. This is when we decided we needed an industry expert’s help.
ChannelE2E: What role did Service Leadership Inc. (SLI) play in the deal?
Fowler: The industry experts we went to were Paul Dippell, Steve Lewis, and Brian O’Connell from SLI. We knew Paul and Brian because they often presented to us in HTG. We knew their experience and wisdom would help us understand the market opportunity. SLI helped us establish valuations for the four companies, prepared financial models based upon various strategies, and they put together recommendations for a corporate structure.
On January 24, 2019 SLI made their final presentation. It was this day that we took a go/no-go vote. We decided a merger was the best path forward.
ChannelE2E: How did you decide on the roles/responsibilities/reporting structure of the owners and team members ahead of the deal?
Fowler: SLI helped us to determine the structure, but who sat in each seat took a while. In fact, everyone was so busy running their own companies that in December 2018 things started to slow down. Some of us got frustrated with the progress. We had to put someone in charge. Everyone is so humble, and we respect the others so much that no one wanted to step forward. It was January 9th that I threw my hat into the ring as CEO. Soon after we began filling corporate roles as we discussed the structure with SLI. We have very accomplished leaders, each capable of wearing many different hats. But during this process everyone checked their ego and took the role that was best for Iconic IT. It is truly an amazing group of people.
ChannelE2E: Did you raise any money to fund the unification of the businesses, or was the deal more a matter of reorganizing ownership stakes to unite the businesses?
Fowler: The transaction itself is cashless… the merger process has been anything but… Consultants, five attorneys and five CPAs can get quite expensive when dealing with the complexity of simultaneously merging multiple companies.
ChannelE2E: I believe you’re all ConnectWise partners (PSA and RMM?). Will a common IT platform ease the combination of businesses?
Fowler: Having a common IT platform is a huge advantage. But just as important is that we have common structures, shared core values, similar business processes, similar target markets and a laser focus on providing great customer service. Remember too that we have been copying each other, I mean sharing best practices, for four years. We know each other’s employees. Our service department managers have calls and go to training together. Our goals are aligned. Relationships already exist!
ChannelE2E: Is the new company looking to make any tuck-in acquisitions?
Fowler: Yes, we are looking to grow through both acquisition and organic growth. And yes, we expect to leverage our merged IT platform, coupled with continuous process improvement to continue to increase efficiencies and to provide a better customer experience.
ChannelE2E: Are you focused on any specific verticals or specific IT services/applications for end-customers?
Fowler: Most of our clients fall into the category of professional services, but we also have expertise supporting medical, non-profit and manufacturing clients.
ChannelE2E: Any advice to MSPs that are evaluating a potential merger, acquisition and/or exit strategy?
Fowler: Everyone should have an exit strategy. It can change often but don’t let that keep you from having a plan. As for M&A, the competitive landscape is changing. The M&A activity in the MSP/SMB space will continue but no one knows how long the multiples will hold at these elevated levels. Everyone should explore their options.
A good exit strategy begins with building a strong company. Then, if you receive an offer, my recommendation is to understand the terms of the deal as much as the price. Have your CPA model any offers so you understand risks and tax implications. And of course, compare it to your exit strategy.
As for merging multiple companies simultaneously… we had unique circumstances, strong relationships and a long working history together, yet it was still an arduous process. But when we had to delivery something, we did it quickly. The usual Kumbaya spirit was overcome by swift execution, clarity of goals, then agreement of goals.
Note from Editor: Special thanks from ChannelE2E to Service Leadership Inc.’s team and ConnectWise’s Arlin Sorensen for their continued guidance as we cover IT service provider journeys from Entrepreneur to Exit.