Mergers and Acquisitions, Mergers and Acquisitions, MSP

MSP Software Acquisitions: More M&A Deals On the Horizon

When Barracuda Networks acquired Intronis this week, it may have sparked the next round of M&A specifically targeting cloud services and software for MSPs. In recent days, I've heard from a range of executives who suggest more MSP software acquisitions are coming over the next three to six months. Here's a sampling of the chatter -- including potential buyers and sellers. Let's start with potential buyers... the companies that could be suitors for MSP software acquisitions -- including on-premises tools or cloud services. They include: Autotask: After trying to be the Switzerland of MSP software -- remaining neutral and working with all comers -- Autotask changed course and acquired CentraStage (cloud RMM) in Sept. 2014. Then, Autotask acquired Soonr (file sync  and sharing) in July 2015. Autotask still works with rival MSP software providers but "coopetition" (cooperation and competition) is the term of the day. Is Vista Equity Partners -- Autotask's owner -- willing to pump more money into M&A? My guess is the company will want to first accelerate the CentraStage and Soonr businesses. But that's just my hunch. Odds of Buying Something: Not sure. AVG Technologies: The security company acquired Level Platforms for its Managed Workplace RMM platform in 2013. The deal was partly driven by Level Platforms' need to sell. Multiple sources have told me that Level Platforms had to sell itself in order to pay debt that came due. I don't sense that AVG is on the hunt for more MSP-centric tuck-ins. Odds of Buying Something: Low. Barracuda Networks: A few folks have called me, wondering if Barracuda will follow-up the Intronis deal with more MSP software buys. My hunch? The short-term answer is likely "no" -- since Barracuda needs to closely study how Intronis operates and services the MSP market. Plus, Barracuda shares plummeted earlier this week amid a lower-than-expected quarterly revenue forecast. I suspect Barracuda is more of a long-term buyer rather than a near-term deal maker. Odds of Buying Something: Low. Cisco Systems: The surprise entry on my list. Under new CEO Chuck Robbins, Cisco is obsessed with the shift to recurring revenues in its own business -- and out in the channel. The recent MaintenanceNet acquisition aligns more with the traditional channel, and investments in the big data world (have you been watching Cisco's Hadoop moves?) align with analytics opportunities. Still, I suspect Cisco is on the hunt for tuck-ins that generate recurring revenues for MSPs. Odds of Buying Something: High. ConnectWise: On the one hand, I think CEO Arnie Bellini is plenty busy managing and scaling ConnectWise and its extended software portfolio (LabTech Software, Quosal, etc.). But on the other hand, ConnectWise has a team of M&A experts that continually studies the market for potential deals, particularly tuck-in solutions that round out the ConnectWise software and cloud portfolio. Also, a solid list of ConnectWise customers are now launching their own cloud and software firms -- providing more potential targets for ConnectWise M&A. Odds of Buying Something: Reasonable. Continuum: CEO Michael George has already tucked a BDR acquisition into the company -- and the results sound startling. MSPs that leverage Continuum's complete portfolio of services (RMM, NOC, BDR) are growing their business with Continuum about 50 percent annually. Based on that data point, George wants to plug more components into the Continuum platform. And it sounds like the company's private equity partner -- Summit Partners -- is willing to pump money into a deal. Still, I suspect George and his M&A team are scouring the market for technologies that have reasonable valuations. Odds of Buying Something: Reasonable to High. Datto: The business continuity specialist acquired Backupify this year. I wasn't even in the market and rumors of the deal somehow reached my inbox before it was announced. These days, CEO Austin McChord has his eyes on the router market -- where the new Datto Network Appliance (DNA) is set to debut any week now. I sense that Datto has its hands full with existing businesses. But McChord and his advisors -- EMC and VMware veterans, by the way -- are ambitious folks that should not be underestimated. Odds of Buying Something: Reasonable. eFolder: When Ted Hulsy landed at eFolder in July 2011, I knew it was an important move for him -- and the company. But I didn't anticipate just how dramatic the business would evolve and mature since that time. eFolder strengthened its own data protection platform for MSPs. Then branched off with the Anchor acquisition (file and sync, 2013) and Cloudfinder (2014). I don't know if eFolder has the wallet to remain on the M&A trail, but CEO Kevin Hoffman is a technologist at heart -- and that means he can quickly study companies to see if they're a solid tuck-in target. Odds of Buying Something: Not sure. Next Page: Four more potential buyers, four hypothetical sellers, and two conferences where back-room M&A discussions will surely occur. More potential buyers of MSP software and cloud companies could include: Kaseya: Insight Venture Partners acquired Kaseya in June 2013. That deal opened the door for Kaseya to buy multiple businesses -- including Scorpion (identity management), Zyrion (BSM) and Rover Apps (MDM). The past two years have involved a major reorganization, a new headquarters, another CEO change and lots of product engineering to integrate all the acquired technologies. Odds of Buying Something: Total guess -- Reasonable to Low. LogicNow: The former GFI Max business is humming along. A recent big data focus will give MSPs so-called LOGICcards -- a new set of applications that blend machine learning and predictive analytics to pinpoint future SMB customer needs. If I had to guess, CEO Walter Scott has his eyes on data-driven opportunities -- but I suspect he also wants to remain focused on a potential IPO over the long haul. Odds of Buying Something: Reasonable if it doesn't distract LogicNow from existing growth plan. SolarWinds N-able: The poster child for successful MSP-centric software acquisitions. The N-able buyout (hmmm... back in 2013?) has performed far better than most skeptics anticipated -- mostly because SolarWinds CEO Kevin Thompson provided resources to N-able GM JP Jauvin without smothering N-able with SolarWinds objectives. More recently, SolarWinds has tucked a small, PSA-like solution into N-able. Odds of Buying Something: Reasonable for the N-able division, high for SolarWinds overall. Sophos: Sophos has been a buyer in recent years -- snapping up Astaro (unified threat management, 2011), Mojave Networks (cloud-based security, 2014) and Reflexion Networks (email security, 2015). I don't know if Sophos is too busy digesting Reflexion to consider another buyout. The core area of focus: "Complete IT security to the mid-market." Odds of Buying Something: Reasonable to high. Other Potential Buyers: What other companies are scouring the market for potential MSP-centric software and cloud plays? I'm sure I missed a few. Feel free to email me ([email protected]) with the names I should be tracking. Potential Targets: Purely hypothetical, based on how the MSP market has consolidated in recent years -- and also based on which companies are still on the board. Potential targets, hypothetically speaking, could include StorageCraftTigerpaw Software, Vorex (though relatively new to MSPs) and Zetta. Even More Targets: Of course, there are hundreds of additional targets worth tracking. Many of them are new ISVs (independent software vendors) that will surface at Amazon re: Invent 2015 and IT Nation 2015 in the weeks ahead. ChannelE2E will be tracking both events closely for you.
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.