Content, Channel markets, Channel partners, Mergers and Acquisitions, Channel investors, Mergers and Acquisitions, MSP, Private equity, Small business

Autotask-Datto Merger: 10 Things Things to Know

The Autotask-Datto merger, expected to be announced Thursday, has major implications for managed services providers (MSPs) and the IT services technology industry. Here are 10 things to know about the deal.

First, some background: The Autotask-Datto merger has not been officially announced as of this writing (Oct. 25, 2017). Sources close to the private equity industry tell ChannelE2E an announcement is imminent. We have not confirmed the deal with Autotask and Datto. But here's what sources tell ChannelE2E...

1. Who's Buying Whom?: Vista Equity Partners — Autotask’s parent — is acquiring Datto and merging the two MSP-centric technology companies, multiple sources in the MSP industry say.

2. Who's Leading the Combined Company?: Datto CEO Austin McChord will lead the combined company, sources say.

3.  What Will the Combined Companies Offer MSPs?: The lineup will include Datto's core products (business continuity, backup, disaster recovery, networking, etc.) and Autotask's portfolio (remote monitoring and management and professional services automation).

4. What Does This Mean for Datto and Autotask Integrations to Third-Party Products?: Sources suggest that the combined company is committed to ensuring that the Autotask and Datto product lines maintain third-party integrations to alternative RMM, PSA, backup and other types of solutions.

5. How Big Is the Combined Company?: Call it a broad, educated guess but I suspect annual revenues are about $325 million to $400 million.

6. Who Are The Perceived Primary Autotask-Datto Rivals?: The lineup mostly involves Continuum, ConnectWise, Kaseya and SolarWinds MSP.

7. Who Are Other Perceived Rivals?: Keep a close on the following companies and their alliances in the weeks ahead. More moves are coming...

  • Barracuda MSP: The company's security and backup portfolio has a growing MSP base.
  • Cisco Systems: Datto Networking wants to compete against Cisco Meraki. Pause your eye here for dramatic effect. Then, keep a close eye on Cisco Partner Summit 2017 next week...
  • eFolder: The data protection company has a loyal MSP base, new offerings from the Axcient merger, and an expanded leadership team that includes ConnectWise veterans Matt Nachtrab and Adam Slutskin.
  • Infrascale: They've quietly built significant momentum in the data protection market with MSPs. True believers include CalNet, a major MSP that is standardizing on Infrascale as part of a broader data management strategy.
  • Veeam: A massive, fast-growing backup software provider. Veeam wants to grow from roughly $800 million now to $1 billion in 2018 to $1.5 billion in 2020. Competition with Datto seems unavoidable. And how's this for an interesting twist: Kaseya and Veeam are backed by the same private equity investor (Insight Venture Partners).
  • Acronis & StorageCraft: Both firms have big MSP bases and partner channels.

8. And Whom Else?: Check out these lists for additional players in and around the MSP-centric software market:

9. What Was The Deal's Value?: The deal has yet to be announced or confirmed by the participating companies. I don't know if financial terms will be disclosed. During a venture capital funding round in November 2015, Datto was valued at $1 billion. That qualifies for so-called Unicorn status. A lot of unicorns have seen their valuations drop over the past 18 months amid reality checks in the IT market. Plus, Datto relies heavily on hardware-oriented sales rather than pure software sales. Despite those variables, I do believe Datto's overall valuation has increased since the 2015 funding. We'll continue to dig on the actual financial terms.

10. When Will the Deal Be Announced?: Multiple sources point to Thursday, October 26. But again, we don't have a confirmed statement from Datto, Autotask or Vista Equity Partners.

11. Bonus - What's the Long-term Exit Plan?: The combined Datto and Autotask will have private equity ownership (Vista, I assume). If the company keeps growing with MSPs, and more and more of the SMB market shifts to MSPs, then it sets up a rather interesting scenario. Specifically, Datto-Autotask could wind up competing with Dell EMC and HP Enterprise in the SMB infrastructure markets. And perhaps at some point, Dell or HPE will stop competing with Autotask-Datto and start courting the company...

Admittedly, I'm getting way ahead of myself. But the Autotask-Datto deal ultimately is about SMB IT services -- and an MSP-centric push to dominate the SMB sector.

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.