Private equity, Enterprise, MSP, Content

AHEAD, Data Blue, Sovereign Systems Merger Forms $1.3B Digital Solutions Provider

AHEAD, Data Blue and Sovereign Systems are merging to form a $1.3 billion digital transformation solutions provider that offers cloud and managed services to Fortune 1000 customers, the firms disclosed this morning. Court Square Capital Partners, a private equity firm, has owned AHEAD since 2015 and Data Blue since April 2019.

AHEAD CEO Daniel Adamany
M&A Interview: AHEAD CEO Daniel Adamany

Here are five key takeaways from the deal:

  1. Technical Expertise: AHEAD's focus includes consulting and implementation expertise in areas of enterprise service management, DevOps, monitoring and analytics, and security. Data Blue's focus includes managed services and networking. Sovereign Systems'  focus includes cloud, VMware and ServiceNow expertise.
  2. Key partners for the combined companies include Cisco Systems, Dell Technologies (and the EMC division), VMware, ServiceNow, Amazon Web Services (AWS) and Microsoft Azure.
  3. Regions served include the Southeast and Northeast (Data Blue); along with the Midwest and Mid Atlantic regions (AHEAD).
  4. Vertical markets served include multiple sectors -- particularly healthcare, insurance, and financial services.
  5. Headcount: The combined company will have about 600 employees -- including roughly 400 from AHEAD; 140 from Data Blue; and 50 from Sovereign Systems.
  6. Related Interview: AHEAD CEO Daniel Adamany explains the deal to ChannelE2E.

The combined company will be headquartered in Chicago, along with continued investment in Data Blue’s Atlanta and Nashville hubs, plus other sales and services offices across the Midwest and East Coast, the company says.

AHEAD, Data Blue, Sovereign Systems Merger: Executive Perspectives

Adamany will lead the combined company. Stephen Ayoub, founder and CEO of Data Blue, shifts to president and chief revenue officer of the combined firm.

In a prepared statement about the deal, Adamany said:

“Together we’ll harness tremendous synergies between our offerings, our partners, and the markets we serve - all to the enormous benefit of clients.”

Managing Partner Matt Cadogan
Data Blue CEO Stephen Ayoub

Ayoub added:

“This merger creates enormous value for our customers and partners, and makes sense on multiple levels. Our firms share similar roots, are committed to client success, and know what it takes to grow profitably in a very competitive industry.”

Matt Cadogan, managing partner of Sovereign, concluded:

“With this combination, our ability to scale expands substantially. Our larger, combined brand will help us serve clients more effectively, but the minimal regional overlap will allow us to maintain the close-knit relationships that our clients have come to expect.”

The deal is expected to be finalized by December 2019. It sounds like the combined company plans to unveil a new corporate in early 2020. Additional acquisitions -- focused on the West Coast and/or additional IT service areas -- may surface around 2021, Adamany told ChannelE2E.

Private Equity's Role in IT Solutions Provider Acquisitions

Court Square Capital Partners, the private equity firm that backs AHEAD and Data Blue, has extensive expertise in the IT services market.

The private equity firm also owns Atlanta, Georgia’s Momentum Telecom -- which acquired DCT Telecom Group in April 2019.

Meanwhile, numerous private equity firms have been acquiring MSPs and their software providers. The private equity firms are drawn to recurring revenues. Plus, MSPs generally have lower valuations than pure SaaS companies -- which generally enjoy more scalable and repeatable business models.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.