As we hinted on April 9, two Texas-based managed services providers are joining forces to apparently create the state's largest MSP. The deal involves Architel of Dallas-Fort Worth buying Applied Resource Technologies Inc. (ART). Here are some observations about the deal.
In addition to being an MSP, Architel positions itself as a technology startup incubator. In contrast, ART claims to be one of the state's oldest MSPs. Financial terms of the deal were not disclosed. The resulting company will have more than 100 employees, and has committed to retaining all ART employees.
Architel claims the deal creates the largest MSP in Texas -- though MSPmentor has not been able to independently confirm the claim. I suspect hosting providers like The Planet of Houston would likely claim to have a larger role in the managed services market, though I realize SMB-oriented MSPs like Architel have different business models than hosting giants like The Planet.
Next MovesRegardless, Architel is focused on growth.
In a prepared statement, Architel Co-founder and CEO Scott Ryan said Architel is:
"constructing a new, state-of-the-art data center and network operations center at the Dallas Infomart to accommodate the combined entity. The new facilities will provide clients with enhanced disaster recovery protection, including the ability to provide temporary office space, desks, phones and connectivity to hundreds of users. The new facilities are expected to go live this summer."ART has a rather interesting company history. Launched in 1988, ART originally focused on database development services before launching MSP services for law firms and real estate companies in 2001. In contrast, Architel is both an MSP and incubator, helping to nurture startups like ShopSavvy -- a mobile application that has attracted millions of users worldwide.
More Deals Coming?No doubt, plenty of MSPs have been mulling M&A activity amid the apparent economic recovery. Some deals involve regional opportunities. Others involve vertical market expertise. Architel's buyout of ART sounds like it has both regional and vertical market synergies.
More deals are certainly coming. During a recent FastChat video interview, mindSHIFT CEO Paul Chisholm indicated that the MSP was mulling at least one additional acquisition in 2010. Other MSPs have contacted MSPmentor privately, expressing a desire to find potential acquisition targets.
Still, we're careful not to hype M&A activity. As an outsider looking in, it's sometimes difficult to determine if MSPs are selling from a position of strength -- or weakness.
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