Private equity firm Norwest Equity Partners (NEP) has acquired Coretelligent, a mid-market managed IT services provider (MSP), from VSS Capital Partners. Financial terms of the deal were not disclosed.
This is technology M&A deal number 670 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.
Looking ahead, NEP expects to acquire and tuck more MSPs into Coretelligent. And VSS will remain a minority investor in the MSP.
Coretelligent Business History, MSP Acquisitions and Growth Rate
Coretelligent, founded in 2006 by CEO Kevin J. Routhier, provides managed and co-managed IT support services, cybersecurity, backup and disaster recovery as well as cloud services. The MSP has 176 employees listed on LinkedIn, and supports customers in such vertical markets as financial services, life sciences, legal, and technology.
Coretelligent is based in Westwood, Massachusetts. The MSP also has offices in New York City, Philadelphia, Atlanta, Stamford, Scarborough, and the San Francisco Bay area, and expanded support locations in Dallas, Los Angeles, Philadelphia, Tampa, Washington, DC, and West Palm Beach.
VSS invested in Coretelligent in 2016. The MSP's revenue and EBTIDA each grew more than 150 percent over that time period, VSS indicated, though actual Coretelligent revenue an d EBITDA dollar figures were not disclosed.
Some of Coretelligent's growth involved acquisitions. Example deals include acquiring:
NEP Acquires Coretelligent: Executive Perspectives
In a prepared statement about NEP acquiring Cortelligent, Routhier said:
"It is with the utmost gratitude we thank VSS for their continued support for a successful partnership over the past 5 years. Their support has helped us build a robust, best-in-class offering in the fragmented MSP market. At Coretelligent, we remain steadfastly committed to delivering robust, comprehensive solutions for our clients’ evolving technology and security needs. Partnering with NEP provides Coretelligent tremendous opportunity for continued scale and differentiation in an increasingly competitive market. Our collective alignment of core values, coupled with NEP’s incredible track record and industry expertise places Coretelligent in an optimal position as we embark on our next chapter.”
Noted Tim DeVries, managing partner at NEP:
“Coretelligent’s best-in-class service offering has created stellar client relationships along with a compelling growth profile. We are very excited to partner with Kevin and the rest of the Coretelligent management team to extend the Company’s leadership position in the attractive managed IT services market.”
Added Garcia Eveloff, managing director at NEP:
“This is a great opportunity for NEP given our experience with IT service investments, successful M&A execution, and partnership with founders. Kevin has built an outstanding team, and it is well positioned to take Coretelligent to the next level. We are excited to be part of the next stage of growth.”
Concluded Trent Hickman, managing director at VSS, who also served as chairman of Coretelligent:
“We are proud of what we have accomplished during our partnership with CEO Kevin Routhier and his team at Coretelligent, which speaks to VSS’s ability to maximize the long-term value and success of our portfolio companies by working closely with management. With Coretelligent, we identified an opportunity to invest in and build a truly differentiated platform company with unique technology and high-performance capabilities that serve a wide range of professional services clients in attractive, fast-growing end markets,” he added.
Norwest Equity Partners typically invests in "well-run, profitable middle market companies that are leaders within their industry" that have at least $10 million in EBITDA (earnings before interest, taxes, depreciation and amortization). Key vertical market focus areas include agriculture, business services, consumer, distribution, energy, healthcare and industrials. NEP's equity investments typically range from $30 million to $250 million or more, and acquisitions typically range from $50 million to $500 million or so, the private equity firm's website indicates.
Private Equity Investments in MSPs: More Money Arrives
Dozens of private equity firms now focus on the MSP market. The attraction involves monthly recurring revenues (MRR), generally predictable profits, aging business owners, and a highly fragmented market that’s primed for rollups and tuck-in deals.
Some of the new funds to watch include:
- Alpine Investors raised $2.25 billion. Evergreen Services Group, backed by Alpine, is an active MSP investor and buyer.
- Trinity Hunt Partners Fund VI, which raised $460 million. Trinity is well-known for IT services investments.
- Summit Partners Growth Equity Fund XI, which raised $8.35 billion. The firm’s existing investments include NinjaRMM and Red Canary.
- Thoma Bravo raised $22.8 billion in October 2020, and was preparing more funds as of mid-2021. Thoma Bravo already owns and/or backs multiple companies in the MSP-centric technology businesses. The investments span Barracuda, ConnectWise, N-able, Sophos and more.
- Vista Equity Partners, the private equity firm that backs MSP-friendly technology companies Datto and LogicMonitor — is preparing Vista Equity Partners Fund VIII LP.
Track all private equity firms acquiring MSPs here.