MSP, Content, Private equity, Venture capital

Investor Suggests CynergisTek Breakup: Managed Print, Cybersecurity Divorce?

An activist investor is calling on CynergisTek, a healthcare IT consulting firm, to shred its Managed Print Services (MPS) business and concentrate on the IT security portion of its company.

In an open letter to the IT firm, Avram Fisher, founder & portfolio manager of Long Cast Advisers, said CynergisTek should consider selling the MPS business in order to focus on the “high return IT Consulting/Cybersecurity business.”

“The math on the two businesses just doesn't make sense for a company this small and undercapitalized and the MPS returns are too low to justify any incremental spend; they should spend all incremental capital growing their IT business,” Fisher wrote.

Fisher even speculated about a potential suitor for the MPS business -- pointing to Stella Point Capital -- an investor that owns document services specialist Veroco. (Admittedly, multiple firms are buying MPS and office equipment dealers these days.)

In the letter he wrote to the company, Fisher noted the following points:

  • “Despite the best intentions of holding both MPS and IT Security under one-roof, we are too small and under-capitalized to invest in both concurrently.”
  • “Every dollar we invest in IT returns substantially more than an investment in MPS so it makes no sense to allocate incremental capital into the low return, slower growth business.”
  • “Mac, our CEO, who built, grew and has already sold his business once, wants to retire. We need to find a dynamic pubco ready, lights out CEO to shepherd the business through its next leg of growth.”

In the letter, Fisher also wrote that a sale would allow the company to grow more organically and provide a bigger return for its investors. “I know I prefer investments where I can own the stock and never have to think about it again, but my attention gets focused when our holdings underperform their own expectations,” he says. “When a reasonable and probable solution exists, I will always fight for mine and my clients' capital.”

For its part, CynergisTek has yet to respond. But it does appear to be concentrating on its security business. Just last week, the company launched its new Biomedical Device Security Risk Assement service to multiple health systems, calling it the “first step of its larger managed BioMedical Device Security service program.”