Best Buy is acquiring mindSHIFT Technologies, one of the top managed services providers in the SMB market, for $167 million. The Best Buy-mindSHIFT deal ends a major chapter in the managed services market -- and begins a new one as well. Updated, 9:12 a.m. ET, Nov. 7: Here's a closer look at the potential implications of Best Buy purchasing mindSHIFT.
mindSHIFT has been ranked near the top of the annual MSPmentor 100 list for the past three years. The annual survey tracks the world's leading managed services providers. mindSHIFT CEO Paul Chisholm has overseen a careful merger and acquisition strategy, buying MSPs in key markets across the U.S. At the same time, Chisholm spent most of 2011 pushing mindSHIFT beyond managed services into the cloud services market.
This Ain't EasyChisholm discussed the mindSHIFT business strategy during the Schnizzfest conference in mid-2011. During panel discussions and off-stage meetings, Chisholm consistently said the managed services market was both exciting and extremely challenging.
Now, Chisholm and the mindSHIFT team seem poised to begin a new chapter in the company's history. Best Buy is expected to complete the mindSHIFT acquisition around the close of 2011. According to the official press release:
"Through the acquisition, Best Buy will help mindSHIFT expand its capabilities for current and future small and mid-sized business clients in industries such as legal, healthcare, financial, non-profits, associations and education. Like Best Buy’s purchase of Geek Squad in 2002, the goal of the acquisition is to support and leverage the proven mindSHIFT business model while giving its management the freedom and resources to grow. mindSHIFT will continue to operate under its current name, management team and capabilities, which currently include 500 employees at offices in Boston; Long Island, N.Y.; Minneapolis; Morrisville, N.C.; New York City; Philadelphia and Washington, D.C."
Competitive LandscapeIronically, mindSHIFT could help Best Buy compete against small MSPs across North America. The Best Buy-mindSHIFT deal could also compete against Konica Minolta (which acquired All Covered in 2011) and against Staples (which acquired Thrive Networks in 2006).
Still, it's important to keep all the deals in proper context. Generally speaking, I believe mindSHIFT had stronger cash flow thank All Covered -- though I don't have the dollars and cents details to back up that statement. Also, I believe Thrive Networks is a considerably smaller player than mindSHIFT.
"I think this [Best Buy-mindSHIFT] is a different deal than we've seen," noted Gary Pica, CEO of TruMethods, a consulting firm that serves MSPs. Pica sold his managed services business to mindSHIFT a few years ago. "mindSHIFT is profitable, well-run and not spread all over the place. They have a hosting back end, and a suite of managed and cloud services that makes them a unique entity. Paul Chishoim has purchased the right companies at the right price, and he made sure all the deals fit together."
Meanwhile, some industry entrepreneurs are wondering how the Best Buy-mindSHIFT deal will potentially impact their wallets. Two prime examples: mindSHIFT acquired both Alpheon and Orbit in recent months. According to an SEC filing, both Alpheon and Orbit had earn-outs tied to their M&A deals with mindSHIFT. MSPmentor is striving to determine how the Best Buy-mindSHIFT deal will potentially impact and/or accelerate those earn-outs.
MSP ValuationsAlso, the Best Buy-mindSHIFT business combination could provide new clues on MSP and cloud service provider valuations. MSPmentor is digging through SEC filings now for potential nuggets of information. But there's also a potential downside here: If mindSHIFT halts its own M&A strategy, it means one of the MSP industry's most astute buyers is no longer willing to bid for your business.
Still, I'm asking more questions than I'm answering at this point. MSPmentor has reached out to mindSHIFT and Chisholm for additional insights about the deal. We'll be back as soon as there's more concrete information to share.