Private Equity Merges Trace3, Data Strategy for Nationwide IT Services -

Trace3 and Data Strategy LLC (DSI) are merging to create a nationwide provider of cloud, data intelligence, security, DevOps, and enterprise IT solutions. Trace3 parent and private equity firm H.I.G. Capital (a very active MSP- and IT services investor) funded the deal. Financial terms were not disclosed.

The two companies pointed to multiple synergies from the deal. “Trace3 clients can now access the depth of DSI’s mobility, collaboration, integration, inventory and managed services capabilities, including the multiple 24x7x365 redundant Network Operations Centers and in-house tier 1-3 support services,” they said. “DSI clients can now access Trace3's security, data intelligence and cloud capabilities, including Trace3’s DevOps.”

Executive Perspectives

In prepared statement, both companies hinted that they considered multiple potential M&A deals before engaging with one another.

Trace3 CEO Tyler Beecher said:

"We looked at a wide variety of potential partners before deciding that DSI was the best fit to propel our growth. We are confident the addition of DSI’s engineering talent, as well as their impressive mobility, collaboration, integration, inventory and managed services capabilities, will further enhance the creative solutions we deliver each day to our clients.”

Added Dana Jacks, president of Data Strategy:

“Our clients will continue to benefit from the deep engineering expertise that has long been a hallmark of both companies. We see tremendous opportunity in this partnership and look forward to collaborating with our new Trace3 colleagues to bring the technologies of tomorrow to our clients today.”

Trace3 (Irvine, California) was founded in 2002, and now employs over 250 engineers with domain expertise across IT design, implementation and operational disciplines. H.I.G. first invested in the firm in June 2017.

DSI (Grand Rapids, Michigan) was founded in 2003 and serves the Midwestern United States. The company's clientele includes organizations in the healthcare, finance, insurance, banking, education, and government sectors, as well as public institutions.

H.I.G. Capital: Private Equity for IT Services

Parent H.I.G. Capital is very active across the MSP, CSP and IT services markets. The company has more than $25 billion of equity capital under management. The family of funds includes private equity, growth equity, real estate, debt/credit, lending and biohealth.

The PE firm's key MSP- and IT services investments have included:

June 2018: H.I.G. invested in Eze Castle Integration (ECI), the well-known managed service provider (MSP) for financial services customers.
October 2017: H.I.G.-backed AVI-SPL, an audio visual specialist, acquired Sharp’s Audio Visual — a Canadian integrator.
September 2016: H.I.G. acquired CXtec (aka CABLExpress Corp.) and TERACAI Corp. — which I believe are two sister businesses based in Syracuse, New York.

Additional insights from Joe Panettieri.