Content, MSP, Private equity

MSP Acquisitions: Nerds On Site Pursues Multiple Buyouts

Nerds On Site is seeking multiple MSP acquisitions as part of a North American expansion plan, the London, Ontario, Canada-based managed IT services provider says.

Twitter: @NerdsOnSite
Twitter: @NerdsOnSite
LinkedIn: Charles Regan, CEO, Nerds On Site

The initial M&A plan calls for four acquisitions -- three in the United States and one in Canada. The company did not disclose a timeframe for completing those MSP acquisitions, but at least one purchase is expected to be completed this year, Nerds On Site indicated.

Ideal acquisition targets are MSPs with $1.5 million to $2.5 million in annual contract revenue, Nerds On Site says. The company did not describe ideal profit margins, growth rates or specific regional locations for such deals. Also, we're double checking to see if the financial figures are in Canadian or U.S. currency.

In a prepared statement about the M&A strategy, Nerds On Site CEO Charles Regan said:

“NERDS is in an ideal position to scale its best practices in the lucrative Centralized Managed Services business through strategic and targeted mergers and acquisitions. We have a proven and systematic approach for success, our key identifier and attraction attributes checklist will guide decision making and focus energy on the right targets at the right time within our attribution range.”

ChannelE2E is checking to see if or how the M&A strategy aligns with Nerds On Site's franchising model.

Nerds On Site: Business Model

Nerds on Site uses a revenue sharing model in Canada, and intends to extend that business model into the United States, according to an investor deck from the company. Again, we're checking to see how the M&A strategy potentially aligns with the franchise model.

According to the undated investor deck, the company says:

  • EntrepreNERDS (eNerds: independent contractors) share between 37 percent to 50 percent in revenue from each contract that they sign.
  • Using this model, Nerds On Site has generated annual revenue of $8 million to $10 million.
  • The company will be selling franchises to approximately 150 eNerds in 10 cities in the U.S., rolling-out an ‘Area Developer franchise’ model. The company expects this to double their revenue to $19 million annually using that model, though a timeframe for that revenue goal was not disclosed.
  • The eNerd ecosystem is typically trained to support Google, Microsoft, Dell, Amazon and Cisco environment.
  • Nerds On Site has its own platform for billing, purchasing and communication between the company, its customers and contractors. We're checking to see if it's a homegrown system or third-party SaaS solution.
  • Key investors in the company include Stadnyk and Partners along with Go Capital, a private capital company.
  • Nerds On Site’s management team holds 50 percent of the shares.

Nerds on Site: IT Services

The company offers a familiar list of IT services to small and midsize businesses, including:

  • managed IT services,
  • 24/7 proactive monitoring,
  • disaster recovery and business continuity,
  • hosted email solutions,
  • hybrid IP phone solutions,
  • IT assessments and consulting,
  • IT help desk and outsourcing services,
  • mobility solutions,
  • network solutions services,
  • onsite SMB IT support,
  • web hosting,
  • wireless networking, and
  • web, application and database development.

Nerds On Site also offers a residential service package spanning hardware, software and consulting offerings, for which they charge by solution, and not by the hour.

MSP Mergers and Acquisitions: Intense Buyer Competition

Nerds on Site has a database of roughly 3000 MSPs that fit its initial target profile. Still, finding and acquiring ideal targets won't be easy. Multiple investment firms, private equity firms and MSPs are pursuing MSP rollup strategies across North America and Europe.

Key movers have included:

MSP Mergers and Acquisitions: Caution Sign

Although the overall MSP M&A market remains strong, ChannelE2E is starting to see signs of fatigue. In particular, buyers are struggling to find well-run, growing, and profitable MSPs that have reasonable "ask" valuations, according to multiple sources from whom we've heard in recent weeks.

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.