- Strong individual performance: Both Red River and CWPS are very healthy, well-run, growth-centric businesses.
- Proven scale: Both companies -- on their own -- could qualify as "platform" MSPs that private equity investors crave. CWPS has 150 employees. Red River's headcount is significantly larger, ChannelE2E believes.
- Vertical market know-how: Red River has a very strong government business, and CWPS has complementary experience in that sector.
- Managed and cloud services expertise: CWPS has strong managed, cloud and recurring revenue experience, and Red River has growing experience in those areas.
- Next-generation differentiators: Red River has big data and analytics know-how, two areas where many MSPs and IT solutions providers have been laggards.
- M&A experience: Red River has previously completed three successful tuck-in acquisitions.
- Financial resources: Red River has private equity backing, but it's a minority ownership position. Red River paid for CWPS using cash flow and long-term debt.
All of those factors suggest Red River is emerging as a major national force in the IT solutions provider market, though ChannelE2E concedes: We don't know actual revenue, profit or balance sheet figures for Red River or CWPS.
Red River Acquires CWPS: Behind the Deal
In an interview with ChannelE2E, Red River Chairman and CEO Rick Bolduc and CWPS CEO Jason Waldrop shared deeper details about the deal.
CWPS, based in Washington, D.C., hired financial advisors in the 2018-2019 timeframe to explore potential strategic moves for the company. Over the past decade, the business successfully shifted toward cloud and managed services -- but Waldrop wanted to achieve even greater scale, he says.
Meanwhile, Red River of Claremont, New Hampshire, has maintained a 30 percent compound annual growth rate (CAGR) in recent years, but the company has been seeking additional scale, expertise and market reach through M&A deals, Bolduc says.
First contact between Red River and CWPS involved bankers representing each firm. Those initial financial conversations earlier this year revealed a range of business synergies. But what about the corporate cultures? To explore that very question, Bolduc and Waldrop first met in Virginia roughly four or five months ago to discuss a possible business combination.
Quips Bolduc, while referring to that initial meeting:
"Jason and his company had us at hello. CWPS is a strong company, with great people, great management, great talent, managed services know-how and a growth model. They had all those things. This is an absolute perfect acquisition for our company at the absolute right time."
Still, multiple companies courted CWPS, sources close to the private equity industry say. Potential suitors apparently included publicly held companies, private equity firms seeking MSP platforms, and peer solutions providers. CWPS began to develop a clear understanding of how the company would potentially look in each buyout scenario. "At every touch point, we kept coming back to Red River as a great cultural and business fit for us," says Waldrop.
Indeed, the two companies point to their complementary efforts across managed, cloud and government services -- and plenty more.
Red River Acquires CWPS: First Priorities, Earlier Deals
CWPS now folds into Red River’s Managed Services organization, with Waldrop serving as the division’s president.
Red River will focus like a laser on culture over the next few months. The company wants to make sure the CWPS team is happy with a clear understanding of their ongoing roles and value to the business over the long haul, Bolduc says.
On the business front, Red River wants to continue to "move the needle" in such areas as solutions-led IT capabilities, recurring revenue and cloud migrations.
Red River has considerable M&A experience. Earlier deals, according to a company spokesman, include:
- Ambonare, Austin, Texas (2018): Ambonare was a technology consultancy specializing in the design, development and management of software products and IT systems. The company’s experience included mobile and web application development, software product engineering, cloud migration and application modernization. The acquisition added to Red River’s technical capabilities in these areas, strengthened its existing office presence in Austin and expanded its SLED contract portfolio within the State of Texas.
- Natoma Technologies of Sacramento, California (2017): Natoma Technologies was a technical consulting firm and systems integrator specializing in software development and integration, IT governance and operations, end-to-end life cycle support for public sector IT programs and advanced technologies. Natoma created custom applications and solutions for the state of California. Red River acquired Natoma to solidify its application development capabilities, expand its geographic footprint and open opportunities within the State of California.
- Accunet Solutions of Boston (2016): Accunet Solutions was a systems integrator and IT consulting services provider founded in 1997, has expertise in healthcare, life sciences and financial sectors. The acquisition expanded Red River’s commercial portfolio and added talent to Red River’s sales and engineering team, including Accunet’s Founder and President, Alan Dumas, who now serves as Red River’s Chief Revenue Officer.
In contrast to those deals, CWPS is Red River's largest acquisition to date, Bolduc says.
CWPS: More Company Background
CWPS was a first-mover toward managed cloud services -- pushing beyond unified communications to offer Microsoft Azure, Office 365 and Amazon Web Services (AWS) expertise long before most MSPs formulated their public cloud service catalogs.
CWPS areas of expertise include network, collaboration, data center, cloud management and security services through Tier 1 service desk capabilities. The company also has a foothold in the government sector, and customer reach across the Mid-Atlantic and Southeast regions.
At least a dozen private equity firms, strategic buyers and investors pursued CWPS as a potential acquisition target over the past year, according to sources close to the private equity market.
Red River: More Company Background
Red River, meanwhile, has expertise across security, networking, analytics, collaboration, mobility and cloud solutions.
Red River now has two 24 x7 Network Operations Centers (NOC) and a geographic footprint that features major office locations in New Hampshire, Virginia, Texas and California with engineering and sales resources in over 25 states, the company indicates.