Joe Panettieri, Former Editorial Director

June 6, 2008

3 Min Read
Three More MSPs Acquired; Private Equity Investors Move In

Managed service providers remain in a buying mood, and continue to gobble each other up. And now, private equity investors are joining the action. The latest three examples: Key Methods purchased Enterprise Systems Inc.; Evolve IP acquired Lyrio IP Technology Solutions; and Wachovia Capital Partners has snapped up HostMySite in a private equity deal.

The HostMySite deal is particularly interesting, since Wachovia Capital Partners’ parent is in financial turmoil at the moment. You can follow these and other deals by reading our MSPmentor M&A Tracker, which has spotted more than a dozen managed services-related acquisitions this year.

Here’s a bit more on each of the three latest deals:

A Seattle SaaS Roll-up?

Seattle-based Key Methods says it has acquired the assets of Enterprise Systems Inc. as well as the firm’s software engineering group. ESI specializes in enterprise resource planning (ERP) for small and midsize manufacturing companies.

Although Enterprise Systems Inc. isn’t an immediate MSP play, Key Methods plans to provide a “future path” to software as a service (SaaS) ERP systems. That’s hardly surprising, considering many Microsoft partners are pushing into the hosted ERP space. And even distributors like Ingram Micro plan to offer hosted Microsoft Dynamics CRM shortly.

Financial terms of the Key Methods-Enterprise Systems Inc. deal were not disclosed. Key Methods is the parent company of several IT-related service providers, including BizTek, Clear Focus and Key Software. Clear Focus appears to be the company’s most prominent Web site.

Philadelphia MSP Deal

Meanwhile, Evolve IP has purchased Philadelphia-based Lyrio IP Technology Solutions. Evolve specializes in managed telephony, compliance services and hosted applications. Lyrio, in contrast, specializes in ShoreTel VoIP solutions. Terms of the deal were not disclosed.

ShoreTel is one of the smaller VoIP hardware providers that’s competing effectively against Cisco Systems Inc. It’s a natural move for ShoreTel partners to move deeper into the MSP and managed unified communications space.

Private Equity Equals New Management

As part of Wachovia Capital Partners’ buyout of HostMySite, new managers are stepping in to run the company. HostMySite founder Lou Honick gives up his CEO seat to become chief strategy officer.

HostMySite says it has more than 250 employees and manages more than 4,000 servers for small and midsize businesses. Financial terms of the deal were not disclosed, but you can get a bit more info from Web Host Industry News.

Interesting, but the real question is as follows: Will Wachovia Capital Partners really remain focused on HostMySite’s well-being? Or will HostMySite suffer under an owner whose parent is in turmoil? Wachovia’s board forced out its CEO earlier this week, the company’s stock has hit a 52-week low, and Goldman Sachs says Wachovia may cut its dividend by 50 percent. Let’s hope Wachovia’s private equity arm stands on firmer ground than its parent, Wachovia Corp.

All told, more than a dozen MSPs have been acquired this year, according to our MSPmentor M&A Tracker.

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About the Author(s)

Joe Panettieri

Former Editorial Director, Nine Lives Media, a division of Penton Media

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