Where Are The Managed Services IPOs?
If the managed service market is so darn hot, when can we expect MSP platform providers to begin launching initial public offerings?
I raised that question during an interview with Nimsoft CEO Gary Read on Monday (April 7). While Read can’t speak directly for other MSP platform providers, he certainly has some strong opinions about Nimsoft’s potential path to an IPO. Here’s a sampling of his thoughts.“For us, we’re definitely building toward an IPO,” said Read, during a discussion about the company’s acquisition of Indicative Software. “That is where we would like to take the company but we’re not there yet with critical mass. It’s expensive to IPO a company and you have to get a pretty high revenue run rate.”
Still, Read appears to have a long-term IPO goal on his calendar. “If we continue to execute against plans, 2009 could be [the IPO year] for us,” he says.
Nimsoft’s annual revenue grew 77 percent in 2007. When you toss in Indicative Software’s sales as well, Nimsoft’s overall revenue was about $35 million for the year. The company has built a fast-growing reveue base by positioning itself as a cost-effective, easy-to-implement alternative to CA Unicenter, IBM Tivoli, HP OpenView and BMC Software.
In anticipation of a potential IPO down the road, Nimsoft already runs itself like a public company by focusing on Sarbanes-Oxley and other corporate compliance regulations, says Read.
When looking at the broader managed services market, Read says he is “surprised” that more platform providers have yet to pursue IPOs. But he notes that SolarWinds, which specializes in SMB network management, filed its S1 document for an intended IPO in March.
At the same time, Read says he won’t be surprised if big technology companies begin to acquire MSP platform providers — a la Dell’s buyout of Silverback Technologies.
As for Nimsoft, Read seems to be in the buying — rather than selling — mood. His company’s acquisition of Indicative Software “really does start to signal a breakout moment for us,” says Read.
Indeed, a breakout moment that could help to position Nimsoft for an IPO in 2009.
The smart money says MSPs will get their own houses in order and work on corporate compliance efforts, but remain privately held in 2008. The markets are too volatile right now and the US sub-prime crisis isn’t over.
The smart MSPs will have all of their financials in order heading into 2009, and will be able to pull the IPO trigger relatively quickly if/when financial markets stabilize.
The only big risk in all this is if venture money runs out before MSPs have a chance to go public. I don’t see that happening.
Congratulations, BTW, on having the only site that knows how to write about managed services and financial issues. Far too many tech sites out their that overlook the business component.
One other piece of info your article overlooked: Many MSP software providers are located in Canada. Generally speaking, it’s easier to go public on Canadian markets (compared to US markets) because the Canadian companies face fewer regulations, IMHO.