First, some background before we step inside the boardroom. ConnectWise invested in multiple companies over the past seven years (most notably LabTech and Quosal), and then reorganized those assets under a single corporate umbrella in 2015.
Over the past five years, speculation about ConnectWise pursuing an IPO or private equity funding has popped up from time to time. Overall, the business remains closely held by co-founders Arnie and David Bellini, but there are additional shareholders -- including executives who joined the business through M&A -- in the mix.
ConnectWise's core focus remains software for IT service providers. The software platforms tackle sales, management and automation processes for ITSPs and MSPs. The company also has a growing distribution-type business, helping third-party security and storage companies to reach MSPs.
Growing and Evolving
ConnectWise beat its Q1 2017 financial goals and grew 22 percent, CEO Arnie Bellini told ChannelE2E in April 2017. The company has also experienced some executive transitions over the past year or so, with former President Matt Nachtrab and Chief Revenue Officer Adam Slutskin joining eFolder; and a CFO shift to Michael Powell. Nachtrab has also exited ConnectWise's board.
At the boardroom level, ConnectWise has essentially involved company insiders -- until the recent arrival of Raymund and Levy.
Steve Raymund, one of the first IT channel titans, was CEO of Tech Data from 1986 to 2006. He recently stepped down as the distributor's chairman. His experience building technology companies, along with his Rolodex on Wall Street and in the tech sector, should serve ConnectWise well. Rumors about his involvement and guidance with ConnectWise have swirled for much of 2017.
Raymund also has international know-how. Most of ConnectWise's installed base remains in the U.S. Although David Bellini has been growing international sales, rivals like Autotask are generally perceived to have a larger installed base in Europe. Raymund may have distribution strategies and partner expertise to help change that perception and/or reality.
Stan Levy, also new to the board, is a Grant Thornton veteran. Grant Thornton is one of the world's top independent audit, tax and advisory firms. The company spans about 60 offices and $1.6 billion in annual revenues.
Both Arnie and David Bellini are CPAs (certified public accountants). They've run a $20 million investment fund and they know their way around the SMB software world. However, Levy brings a separate skill set to the boardroom -- global-scale financing.
Levy's personal consulting firm has focused on corporate governance, sales, mergers/acquisitions, and corporate strategy, according to his LinkedIn profile. Also, he has advised CEOs, boards and private equity firms. During his final years at Grant Thornton, he was responsible for private equity in the Southeast and other geographic areas.
Private Equity's MSP, IT Service Provider Market Influence
I'm not suggesting that a ConnectWise financial event -- IPO, private equity, etc. -- is imminent.
The company's fastest-growth years -- at least in terms of percentage growth rate -- likely involve the early years of ConnectWise cross-selling LabTech RMM (now ConnectWise Automate) into its PSA installed base. Also, some third-party sources have suggested ConnectWise's push beyond software into distribution could potentially hurt the company's valuation or investor interest in an IPO. But one source close to the company says that hasn't been the case, asserting that the distribution component has provided lift to ConnectWise's revenues and valuation.
No doubt, ConnectWise could remain privately held with no outside funding. The company has no debt; monthly free cash flow in excess of $1 million that can be allocated toward investments; and $40 million to $80 million of bank financing that could be put in place, CRN reported.
Meanwhile, all of ConnectWise's major rivals have accepted private equity funding in recent years. And more moves could be coming.
- Datto, not a head-on ConnectWise rival but certainly in the MSP space, allegedly hired Morgan Stanley to explore a potential company sale.
- Kaseya has floated the possibility of an IPO filing in late 2018, though I think that may be a test balloon to stir a potential strategic buyer to the table.
- Autotask, Continuum and SolarWinds MSP remain owned by private equity firms, though there has been speculation that Autotask could be acquired by another PE firm in the next 12 to 18 months.
I'm not predicting ConnectWise will pursue any of those paths. But having Raymund and Levy in the boardroom certainly positions ConnectWise to more clearly see its short- and long-term business options on a global scale.