Mergers and Acquisitions

Fulcrum IT M&A Approach: MSPs Keep Branding, Operational Independence

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The managed services provider (MSP) sector is undergoing rapid consolidation, driven by both private equity investments and acquisitions by industry players. The allure of recurring revenue models and constant demand for sophisticated IT solutions has kept the volume of mergers and acquisitions high. As a result, numerous platform MSPs have emerged, each employing unique strategies to expand their services and geographic reach.

ChannelE2E's ongoing series examines how these platform MSPs amplify their services, expand geographic reach, enhance their talent pools, and boost earnings through strategic acquisitions. 

The 20 MSP integrates member companies into a collaborative network, updating branding and renaming acquired entities. Similarly, Ntiva rebrands its acquisitions to align with its corporate identity. Brightworks IT, backed by Cloud Equity Group, allows purchased companies to maintain their original names and logos, adding the “Brightworks IT” brand. Amidst this landscape of rapidly changing ownership and integration, Evergreen SG offers a novel approach by allowing each MSP to retain its brand, team, and operational autonomy, providing a stable, permanent home for these businesses.

Amid this competitive landscape, Fulcrum IT distinguishes itself with a unique acquisition approach that emphasizes long-term partnerships, strategic alignment and collaborative innovation.

Background of Fulcrum IT

Unlike some of its competitors, Fulcrum IT allows the companies it acquires to retain their branding and operational independence. This method fosters an environment where innovation and expansion are key, according to company executives. 

"We acquire these very talented people that built these companies. It's great to just let them go to some degree, you know, we want them to keep their growth trajectory and we just help support it," Kelly Carter, chief strategy officer, Fulcrum IT, explained to ChannelE2E.

Carter and Kyle Lanzinger play pivotal roles in Fulcrum IT's strategy. Lanzinger, who recently took on the role of global president, has been with Fulcrum IT for six years, contributing significantly to its acquisition strategy. He has led approximately 20 acquisitions, helping to shape Fulcrum IT's portfolio and operational landscape. Carter, as the chief strategy officer, works closely with the founders to steer high-level strategies across the business, focusing on identifying growth opportunities and aligning the company’s efforts with its long-term goals.

Fulcrum's focus is on acquiring MSPs that align with its vision of growth and innovation, the pair told ChannelE2E. 

By maintaining the unique identities of these companies, Fulcrum IT ensures that the strengths and expertise of each entity are preserved and leveraged across its broader network. This approach not only supports the stability of the acquired companies but also enhances the overall capability and reach of Fulcrum IT as a whole, they said.

Strategic Acquisitions: A Recipe for Success

The company’s acquisition strategy is both methodical and flexible, designed to identify and integrate MSPs that align with its long-term vision. Lanzinger noted that, while it’s not a hard-and-fast rule that Fulcrum work with MSPs before acquisition, it often happens naturally. 

"We have acquired a few different companies that we've worked with in the past. Naturally, that's often a very good way to work with somebody, get to know them, get to know how they do business and identify synergies ahead of an acquisition," Lanzinger said.

Fulcrum often leverages its network of industry advisors to identify potential acquisition targets. "Often, they're introducing us to the companies that they think are a great fit for us,” Lanzinger said. “Teams and owners who are aligned to our vision, our strategy and would be a good fit." 

The decision to acquire is based on several factors, including the potential for growth and alignment with Fulcrum IT’s strategic goals. Carter said that their approach is a mix of opportunistic acquisitions and targeted searches for specific capabilities or geographic presence. 

"It's a combination of all those things. We really want to acquire someone who's got a skill set in this area or potentially has customers in a certain region," she said.

Due Diligence and Seamless Integration

The due diligence process at Fulcrum IT is thorough, ensuring that every potential acquisition aligns with the company’s strategic objectives and values. Despite often having prior working relationships with target MSPs, Fulcrum still conducts a comprehensive review to confirm the fit and identify any potential issues. 

While introductions from trusted advisors can help in vetting potential acquisitions, Lanzinger said they don’t necessarily expedite the due diligence process. 

"It certainly increases the success rate versus what a cold outreach would do. But I wouldn't say it speeds up diligence. There's still standard stuff that we have to do," he said.

Once an acquisition is agreed upon, Fulcrum implements a structured onboarding process to integrate the new MSP into its network. This process typically starts with a 100-day plan, focusing on understanding the acquired company’s operations, identifying opportunities for growth, and integrating key capabilities. 

"The first 30 or so days is about identifying and just understanding anything we missed during diligence, all of the opportunities that they have, the pipeline and where they're seeing capabilities that we could bring to the table," Lanzinger explained. 

The next phase involves designing new approaches and strategies to enhance collaboration between the acquired company and Fulcrum IT’s existing operations. This includes exploring cross-sell opportunities and leveraging the top capabilities of the newly acquired company. "The next 30 days or so is spent designing new ways, new approaches, ways that they engage with our teams, ways that our existing teams engage with them," he added.

Implementation of these strategies occurs in the final phase of the 100-day plan, focusing on a few key initiatives to ensure a smooth transition and immediate value addition. "The last 30 days are spent implementing that agenda. Nothing crazy; we don't boil the ocean, but a couple of new strategies, a couple of new things where our team's gonna help and see how it goes," he said.

Addressing Security Needs Through Strategic Partnerships

In the rapidly evolving digital landscape, cybersecurity remains a top priority for MSPs. Fulcrum IT addresses this need through a combination of strategic partnerships and in-house initiatives, ensuring its portfolio companies can offer robust security solutions to their clients. 

Fulcrum works with various partners in the security operations center (SOC) industry to provide comprehensive cybersecurity services. 

"We have partners in the SOC industry that we work with -- vendor partners -- but this would be likely additive to those as opposed to competitive," Lanzinger explained. This approach allows Fulcrum IT to enhance its cybersecurity capabilities without directly competing with its partners, he said.

In addition to partnering with external SOC providers, Fulcrum IT is exploring the acquisition of its own SOC to deploy across its portfolio companies. This move aims to offer consistent and integrated security services tailored to the specific needs of its clients. "We are looking at making investments and looking to acquire at least one SOC to be able to deploy that to all of our companies," Lanzinger added.

Long-Term Strategy and Impact

Fulcrum IT's long-term strategy is centered on creating sustainable growth and stability for its portfolio companies, according to the executives. 

Unlike many acquirers who prioritize cost synergies and immediate returns, Fulcrum IT focuses on growth synergies and long-term value creation. 

"We focus on where the growth synergies are. Where can we grow?" Lanzinger said. 

This emphasis on growth over cost-cutting allows Fulcrum to invest in the future of its portfolio companies, supporting their expansion and innovation efforts. 

"We are looking for companies that have a well-developed plan to grow, and we can help them expand on that plan and grow faster," Carter said.

Fulcrum IT: Strategic Alignments

While Fulcrum IT’s approach to acquisitions, characterized by a focus on long-term partnerships, strategic alignment, and collaborative innovation, isn’t completely unique in the space, it still allows the company to acquire businesses that retain their unique identities while fostering an environment of shared growth and best practices.

Through rigorous due diligence, strategic investments in cybersecurity and a commitment to sharing best practices, Fulcrum IT aims to ensure that each acquisition contributes to the overall stability and growth of its portfolio, according to Carter and Lanzinger.

As the MSP sector continues to evolve, Fulcrum IT’s commitment to building long-term value and fostering collaborative growth positions it as a significant player in the industry. By prioritizing innovation and stability, Fulcrum IT is not only supporting the success of its portfolio companies but may also be shaping the future of managed services.