Evolve IP’s $100 Million War Chest for MSP, CSP Acquisitions
Evolve IP, backed by newly raised private equity funding, has a $100 million war chest for potential acquisitions. The cloud services provider, based near Philadelphia, is speaking with about six to eight IT service providers at the moment and mulling potential acquisitions, CEO Thomas J. Gravina confirmed to ChannelE2E.
As part of the M&A discussions, “we’re spending a lot of time and energy on culture,” Gravina adds. “Sure, we’re very interested in their products and services. But business culture — where Millennials and Gen X have authority, responsibility and autonomy — is very important to us.”
Evolve IP, a ChannelE2E 100 company for 2016, has acquired seven businesses over the past eight years. Roughly six months ago, the company reached an inflection point. “All of our [key performance] indicators are strong,” says Gravina. “But you get to a point in the business and you ask — ‘What do we really need to accelerate this?’ We think the cloud opportunity going forward is really substantial. The only way to accelerate it was to access significant capital.”
Evolve IP: Private Equity, IPO or Something Else?
Evolve IP considered multiple routes — a potential IPO, strategic opportunities and private equity deals. Through careful research, the company aligned with Great Hill Partners, a private equity firm in Boston, Mass. Great Hill invested money in the company and acquired majority control. Financial terms were not disclosed, but the deal includes a $100 million war chest for Evolve IP to make potential acquisitions.
Evolve IP aligned with Great Hill because “we concluded they knew us the best and knew the industry the best,”says Gravina. “And we didn’t want to change our business as part of the access to capital.” In other words, it sounds like Evolve IP will maintain autonomy and its business focus, despite Great Hill’s majority ownership stake in the business.
Even before the funding arrived, Evolve IP was in growth mode. The company expanded from 74 employees in 2011 to 195 in 2015. Headcount is currently about 210 employees, but that will continue to grow in the next 12 to 18 months, Gravina said. For 2014, the company’s revenues were $47 million, according to the Inc. 5000 survey. But revenues have grown “substantially” since that time, Gravina says.
Evolve IP: Not Another Amazon or Azure Cloud
Instead of competing head-on against Amazon Web Services and Microsoft Azure, Evolve IP insists its focus is “totally different” than those cloud giants. Key focus areas involve Unified Communications as a Service, contact center services, and network and security services wrapped around cloud and disaster recovery. The company targets midmarket customers.
“Those companies are looking for technology and business partners that have expertise above and beyond their own resources,” says Gravina. “It’s an ever-changing game they can’t keep up with. Our model provides all that in amore cost effective, more efficient way. We’re freeing out customers up to focus on user experience.”
Indeed, customer experience and user experience have been major focus areas for enterprises and midmarket businesses over the past couple of years.
Looking ahead, Evolve IP plans to “expedite” its merger and acquisition strategy. “Six to eight companies are on the board and we’re having discussions with them,” says Gravina. And once again, he reiterated, the ideal targets will be cultural fits for Evolve IP.
Potential MSP, CSP Buyers
Of course, Evolve IP isn’t the only potential suitor in the market for MSPs and CSPs. Several private equity- and corporate-backed IT service providers could be making more acquisitions in the months ahead. Potential buyers could include:
- AHEAD, backed by Court Square Capital Partners.
- All Covered, backed by parent Konica Minolta.
- Pomeroy, backed by Clearlake Capital Group.
- Presidio, backed by Apollo Global Management. Presidio has made multiple acquisitions in the past year.
- Synoptek, backed by Sverica Capital Management. Synoptek CEO Tim Britt explained the company’s growth strategy in ChannelE2E Podcast 064.
What companies did we overlook? What deals are on the horizon? We’re all ears…