Bridgepointe, One Source Explain How M&A Tactics, Agent Targets Vary

Partners in the agent channel considering M&A need to weigh multiple factors before agreeing to an acquisition.

M&A in the technology advisor (agent) market continues to capture the attention of business owners. While the number of national TSDs has turned into just a handful of providers, a plethora of strong independent customer-facing agencies remain. However, many of their peers have agreed to deals with a strategic buyer. Some of the sellers did so to gain a financial option for retirement. Others wanted to stay on board at the combined company and grow their existing business. Partners need to understand exactly where they stand on what they want from M&A, as the strategic buyers vary in what they bring to the table.

Four of these buyers will participate in a session at the upcoming Channel Partners Conference and Expo. The conference track, “Emerging M&A: Not All Plays Are Created Equal,” will take place on May 2. The panel will feature Steve King, chief development and M&A officer at Amplix; Scott Evars, co-founder of Bridgepointe Technologies; Tim Meng, CEO of One Source Communications; and Seth Penland, founder and CEO of Bluewave Technology Group. Their respective companies have all engaged in agent M&A over the last two years.

Those four companies don’t represent the only M&A in the agent space, of course.

For example, E78 Partners acquired MacroNet and Profit Enhancement Systems using funding from private equity firm Further Global. E78 provides financial and  accounting solutions targeted to CFOs, and more recently it has expanded its technology advisory and management service line. ARG has bought multiple advisory firms over the last several years, including NextWave and GNS.

And then of course, Berkshire-funded Upstack has purchased a reported 27 agencies. In addition, some strategic acquisitions have occurred, like with Renodis buying a few complementary businesses, and Resourcive buying a cybersecurity consultancy.

Channel Futures chatted with Evars of Bridgepointe and Meng of One Source about their M&A plays and advice for agents.

One Source Communications’ Tim Meng

Channel Futures: Could you summarize the M&A options you offer to partners?

Tim Meng: While we can accommodate a wide range of structures, we most often engage with a seller by acquiring the operating assets (for example, taking over contracts and customer bases) for a guaranteed cash payment at close, without requiring a long-term employment obligation from the seller or restricting their options through a non-compete.

Scott Evars: We have programs to fit multiple outcomes depending on the desires of the partner or agency.

Bridgepointe’s Scott Evars

Primarily, we’re looking to make strategic investments in independent sellers with growing client bases, solid renewals and opportunity for cross-sell. Our investment deals enable partners to take some risk off of the table and take advantage of the current acquisition climate while continuing to run their business over the next few years and see elevated valuations based on accelerated growth as a result of additional products, capabilities and resources. Additionally, every Partner (with a capital P) receives early-stage equity alongside our founders.

We’re also interested in acquiring customer bases and surrounding them with support to grow in cases where partners are seeking a full exit for whatever reason.

Lastly, we’re acquiring regional [TSDs] and strategic services businesses to expand our geographic coverage and most importantly to add commissionable services for partners to sell under the Bridgepointe brand to capture more wallet and increase retention.

CF: What are the core aspects of a transaction offer?

SE: Any deal will generally have a valuation based on a multiple of EBITDA. That multiple will be based on the size of the base, retention, its growth rate and several other factors. Subs and employees also filter into the equation. There is an upfront investment, a long-term growth component and the opportunity to …