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Merger Creates $1.5 Billion MSP Called Exela Technologies

John Visentin

John Visentin

Ron Cogburn

Ron Cogburn

Exela Technologies — backed by $1.5 billion in annual revenues and a $2.8 billion valuation — is a managed services provider (MSP) you’ve never heard of. How’s that possible? Exela won’t officially exist until a massive merger creates the newly named business sometime in Q2 2017. Here’s the background…

The names to know in this big MSP M&A deal include:

  • SourceHOV: SourceHOV is a global Transaction Processing Services (TPS) and Enterprise Information Management (EIM) company. It has roughly 16,000 employees and operates 120 centers across the Americas, EMEA and APAC. SourceHOV’s technology platforms are available on-premises and/or in the cloud. OwnerHandsOn Global Management (HGM).
  • Novitex Holdings: Novitex is an MSP that specializes in document outsourcing, communications and back office solutions. The company has 7,500 employees and customers across the Fortune 500, while also focusing on the legal and government verticals. Owner: Apollo Management Group.
  • Quinpario Acquisition Corp. 2: Quinpario is a special purpose acquisition company that IPOed in January 2015. Quinpario sole purpose is to acquire one or more businesses through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination.

Coming Soon: Exela Technologies

In a deal announced this week, those businesses are now merging to create Exela — an MSP and “multichannel information services” company with 23,500 employees and 3,500 customers in 55 countries. (Quick math based on pre-deal employee headcounts suggest to us that some overlapping positions will be eliminated.)

The deal is valued at approximately $2.8 billion. Exela expects to generate about $385 million in EBITDA for 2017, so the deal’s valuation is roughly 7.3 times projected EBITDA, the participants say. (For more on MSP valuations, check out the ChannelE2E FAQ.)

SourceHOV CEO Ron Cogburn and Novitex CEO John Visentin say the deal delivers economies of scale and automation to position Exela Technologies for accelerated growth. However, the announcement did not disclose whether Cogburn, Visentin or another executive will lead the combined company.

This much is known: Exela will have eight board members, including three directors to be nominated by HGM, two directors to be nominated by Apollo and three independent directors, the companies said.

The deal is expected to close sometime in Q2 2017. Stay tuned for more updates.

Complete M&A Coverage: Track all VAR, MSP and CSP mergers and acquisitions by visiting the ChannelE2E Milestones section daily. Also, check out ChannelE2E’s Top 100 Mergers & Acquisitions across the IT channel, 2017 edition.

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