Kaseya Acquires Datto to Create Largest MSP Technology Provider
Kaseya, backed by multiple private equity firms, is acquiring Datto for $6.2 billion. Kaseya’s backers include Insight Partners, TPG Capital, Temasek and Sixth Street, the deal participants said. The combined Kaseya-Datto business will likely be valued at more than $8 billion, assuming Kaseya’s assertions of a $2 billion valuation in 2021 were on the mark.
We’re checking to see if Datto’s existing private equity backer — Vista Equity Partners — will maintain any type of stake in Datto.
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Datto in March 2022 disclosed that it was exploring a company sale. Kaseya has been exploring either an IPO or a recapitalization event for roughly two years. Fast forward to the April 2022 M&A news, and Kaseya is paying a 52% premium compared to Datto’s stock ($MSP) as of mid-March 2022, the companies note.
The deal surfaces the same day that MSP cloud marketplace Pax8 raised $185 million from Softbank and other firms. The key takeaway: Venture capital firms and private equity firms continue to shine an even brighter light on the MSP technology market.
Kaseya’s pending Datto buyout, expected to be finalized in the second half of 2022, is technology M&A deal number 367 that ChannelE2E has covered so far in 2022. See more than 1,000 technology M&A deals listed here.
Kaseya Buys Datto; Deal Creates Largest MSP Technology Provider
The Kaseya-Datto deal, once completed, will create a massive MSP technology provider that’s considerably larger than such rivals as ConnectWise and N-able (both of which are backed by private equity firm Thoma Bravo).
According to LinkedIn, headcount figures for each company as of April 11, 2022, were roughly:
- ConnectWise – 2,257 employees
- Datto – 2,053 employees
- Kaseya – 1,752 employees
- N-able, 1,132 employees
Despite the potential size and scale of the Kaseya-Datto business combo, the M&A deal likely creates an inflection point for thousands of MSPs worldwide. No doubt, many of those MSPs will march forward with Kaseya and Datto, though others may consider alternatives as Kaseya and Datto sort out their product roadmaps and digest their business combination.
Kaseya-Datto Merger: MSP Software Market Implications
Among the deal variables to watch:
- Potential MSP Winners: Some MSPs will celebrate the Kaseya-Datto deal — especially those that want to run Kaseya RMM (remote monitoring and management), Datto PSA (professional services automation) an Datto data protection solutions in tandem.
- Potential MSP Concerns: Others MSPs will potentially lament product overlap — since Kaseya and Datto have numerous competing PSA, RMM, data protection and cybersecurity products.
- Kaseya-Datto Rivals: Rivals and upstarts will surely seek to capitalize in the Kaseya-Datto merger. In addition to ConnectWise and N-able, key rivals include NinjaOne, Atera, SuperOps.ai and Syncro MSP.
Kaseya Buys Datto: MSP Market Reach, Growth
Why did Kaseya want to acquire Datto? The short answer involves MSP market reach. Indeed, Datto as of the end of 2021:
- Served more than 18,500 MSP partners — a net increase of 1,500 (up about 9%) from the previous year.
- Generated about $35,600 of ARR (annual recurring revenue) per MSP, up about 11% from the previous year.
- Supported 1,400 MSPs that spend at least $100,000 in ARR with Datto, up 27% from December 2020.
Much like Kaseya, Datto has been striving to blend organic growth with acquired technology. Key Datto moves include acquiring Infocyte for Endpoint Detection and Response (EDR) technologies and Managed Detection and Response (MDR) services. It sounds like a promising acquisition, though Datto will face intense competition from far larger and rapidly growing EDR and MDR software and service providers — including a newly minted unicorn named eSentire.
Meanwhile, Kaseya has been in growth mode ahead of the Datto M&A announcement. Indeed,Kaseya grew 25 percent in 2021 vs. 2020, according to a January 2022 statement from the company. Key moves from 2021 include acquiring managed SOC (security operations center) RocketCyber and MSP coaching firm TruMethods.
Kaseya Acquires Datto: Voccola and Weller Statements
In a prepared statement about the Datto buyout, Kaseya CEO Fred Voccola said:
“This is exciting news for Kaseya’s global customers, who can expect to see more functional, innovative and integrated solutions as a result of the purchase. Datto has a legendary commitment to its customers and employees. The alignment of our missions and focus makes us a natural fit, that will help our greatly appreciated customers reach new levels of success. Kaseya is known for our outstanding track record of retaining the brands and cultures of the companies we acquire and supercharging product quality. We couldn’t be more excited about what lies before us – Kaseya and Datto will be better together to serve our customers.”
Added Tim Weller, CEO of Datto:
“Datto has always been committed to creating world-class technology for SMBs and delivering it through our global network of MSPs to align our growth with the channel. Combining with Kaseya brings together a broader array of technology products to create additional opportunities for MSPs. I’m encouraged by the continued investment in the rapidly-expanding global MSP community, and this transaction is another important validation of the channel.”
Concluded Michael Triplett, managing director at Insight Partners:
“At Insight Partners, we work with IT infrastructure technology leaders who define and grow their markets through world-class software, data and innovation. We are excited to continue to support Kaseya, an industry-defining IT and security infrastructure management company, as they deepen their support for the industry and enhance the experience of their customers.”
Kaseya and Datto did not disclose post-deal executive leadership positions — though that’s not surprising considering the immediacy of the M&A news.
Kaseya ConnectIT and DattoCon 2022 Conferences
The Kaseya-Datto M&A deal is expected to close in the second half of 2022. Datto will go private under terms of the deal, the parties indicated.
MSP Software – Antitrust Concerns?: Some investors are wondering if the Kaseya-Datto deal will trigger antitrust scrutiny. After all, the Biden Administration is more closely tracking technology M&A deals to ensure business combinations won’t hurt competition and customer choice. Still, I think the MSP software market continues to have extensive options and alternatives — both established and emerging — for MSPs to evaluate and adopt.