Agent Merger: PE-Backed New England Technology Advisor Team-Up Forms Amplix
Check out this blueprint for channel M&A.
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Amplix CEO Joe DeStefano said approximately a year ago leaders from the three companies met with one another. Each had been getting their own share of attention from potential investors.
“We were all having independent discussions with strategics that wanted to come in and gobble us up and make us part of their organizations,” he said.
They were getting ready to attend a holiday party of one of their mutual technology services distributors (TSDs). DeStefano said he and his soon-to-be partners decided to sit down for a conversation before going to the party. They agreed to compare notes on what they saw occuring in the marketplace, and specifically, in agent M&A.
“We sat down with one another and said, ‘Who knows how to do this better than folks that have run these businesses for the past two decades?’ We all agreed that we were in the position to do it the right way and have the best outcome for our customers and for our employees,” DeStefano said.
They showed up late to the holiday party that night.
DeStefano said the folks at ROI, allConnex and Blue Front know each other well. He attributed that New England culture.
“We’re all very friendly. We don’t really compete against one another,” he told Channel Futures. “Our competition is the direct sales force from the vendors that we represent.”
He said in some cases the three partners have sold to the same customer in different technology silos. In some cases, they pointed the prospective client in the direction of their peer.
“We’ve come across common customers, and once we found out that the other organization was working with that customer, we walk away and let that other organization know, ‘I just met with John Smith, and he’s looking at a technology that you might want to reach out to him and talk to him about,'” DeStefano said.
In addition, one firm would host other firms at its office when a vendor visited for a training.
These three partners all brought different strengths to the table, DeStefano told Channel Futures.
ROI focused on cybersecurity, UCaaS, global network solutions and some CCaaS. DeStefano said his tenure leading Presidio’s carrier services practice from 2004-2011 gave him a skillset to tackle the midmarket to lower enterprise. It also influenced him to build deeper engineering and customer support teams.
Blue Front brought a pedigree in public sector, possessing state contracter status with the Commonwealth of Massachussetts. It also has developed a virtual practioner practice. Moreover, DeStefano said Blue Front has done more in cloud than ROI.
And allConnex offers “unmatched” UCaaS expertise. That comes in part from all its sister company, BridgeConnex (which Jamie Kuzman and Steve King run), which provides internet services and cloud/hosted PBX services. In addition, DeStefano said allConnex plays strongly in connectivity.
Moreover, allConnex brings an “unmatched” subagent model. Those subagents include MSPs, systems integrators and VARs that lacked their own carrier practice, as well as former carrier reps that wanted to help their customers more without investing deeply in back office.
“ROI and Blue Front had a few subagents but not anywhere near the size and scope of what allConnex brings to the table,” DeStefano said.
DeStefano said the friends didn’t immediately go to a private equity partner. He said they agreed to find a banking expert who understood the technology advisor model. They interviewed multiple banks before picking Bank Street.
“We went to them, and [asked] ‘Where do you think we could have our biggest impact? Is it through marketing to strategic organizations that want to have our expertise, or is it going to private equity or venture to give us the best tools that we can get to service our customer and employee population?’ It wasn’t immediately saying, ‘Hey, we’re gonna go out and find private equity money.'”
He said their book of business went out to multiple organizations for review. However, they and their advisors ultimately turned to private equity, in the form of Gemspring, which DeStefano said bought into their vision.
He added that the entire undertaking lasted a long time and proved challenging. That’s mainly because of how foreign the process was to them.
“We’re good at selling technology, supporting customers and having significant business outcomes for these customers — not going out to to private equity or hiring investment bankers and legal,” DeStefano said. “That wasn’t our expertise, but we did it together, and we did it well. We found a fantastic financial partner in the process.”
Gemspring states on its website that it currently has $1.5 billion under management. The seven-year-old company has secured 59 investments, according to its brochure. Its portfolio spans several industries. For example, it owns a large T-Mobile wireless dealer, a commercial security systems provider, an electrical services provider and a visual effects company.
Gemspring managing director Zubani Malkani expressed excitement at the opportunity to accelerate Amplix’s growth.
“Businesses today are grappling with growing IT complexity, resource constraints, and remote workforces as they embark on digital transformation initiatives, driving increased demand for advisors with strong technical expertise and the ability to provide end-to-end support,” Malkani said. “Amplix has the scale and resources to help IT leaders accelerate digital transformation and drive maximum impact to their desired outcomes through technology.”
The combined company will use and expand ROI’s Baseline IT platform.
The software platform gives customers insights into pricing, inventory, order management and other support metrics.
DeStefano said ROI Communications evolved its customer support platforms over the years, moving from spreadsheets to TSD tools and most recently to Baseline.
“It was a long journey, but from what I’ve seen and used in the past and what I know about this business, it is a world-class platform that supports our customers from from cradle-to-grave,” he said.
An obvious challenge of merging three agencies is the melding of different leaders who previously left the corporate world to run their own companies.
“I think it’s a difficult road to toe, and we were very fortunate in being very friendly with one another in having the same type of values and being able to kind of check the egos at the door,” DeStefano said.
He said the leaders sat down for a two-hour call to structure a pro forma organizational chart. The call only lasted an hour.
“Because we all knew what we were good at and what we weren’t good at, and we knew our people well,” DeStefano said.
DeStefano served as a senior account executive at AT&T before going to run Presidio’s carrier services practice. Passacantilli won the President’s Club three times at XO Communications before founding Blue Front in 2002. King and Kuzman were both at Global Crossing before co-founding allConnex.
DeStefano said Amplix’s vision starts in New England. All three companies have operated offices in Massachussetts. The combined entity will run its headquarters out of Norwood, Massachussetts, with offices in Boston.
DeStefano said Amplix will ultimately expand its borders. However, the journey starts with doubling down in their own backyard.
“Our charter for the foreseeable future is to build a very strong Northeast practice, where we’re laser-focused on our customers in-region, which are national and global in scope for sure, but we can reach out and touch that customer,” DeStefano said. “And things will change over time, but we want to build that fort – that moat, that impenetrable force field – around our region, and then methodically, thoughtfully grow.”
DeStefano emphasized that Amplix will maintain close relationships with its tech services distributor (TSD) partners. Fellow super agency Upstack earlier this year announced multiple direct agreements with vendors, the largest being Lumen. That move drew the ire of the TSD community, which historically has intermediated those relationships between vendor and agent.
DeStefano pointed to the value TSDs have brought to his firm. That includes pre-sales tools as well as mentorship from leaders at those distributors.
“We’re embracing that ecosystem. We’re not interested in disintermediating things. We see a tremendous amount of value in all of the large [TSDs],” he said. “They provide that large scope of vendors in their ecosystem so we don’t have to go out and contract with every single vendor that’s going to be a good fit for our customer.”
The deal comes as private equity-fueled investment abounds in the technology advisory channel. Upstack has acquired more than 25 independent agencies with the help of Berkshire Partners and other financial partners. Columbia Capital-backed Bluewave Technology Group recently announced its sixth acquisition in a year. In addition, Bridgepointe Technologies has been giving equity investments to its partners and acquiring agencies with the help of Charlesbank Capital Partners.
DeStefano tipped his hat to those organizations.
“They’re all formidable competitors. They just do it differently than then we’re going to do it, and they have a different methodology on how they get to their end state as to how we get to our end state,” he said. “In my opinion, I think we have a better mousetrap.”
DeStefano said the process involved a market study of the actual penetration of the trusted advisor model. The results came back that only 15% of potential customers were leveraging the agent/broker model for procurring technology. Those numbers reflect what other partners have been saying: Advisors aren’t working to displace one another, but rather direct sales forces from vendors and legacy hardware VARs.
That’s one of the reasons ROI, allConnex and Blue Front didn’t view each other as competitors.
“In our opinion, there’s plenty of eating to do, locally and nationally,” he said. “There’s another 85% out there that’s untapped that we can go after, so why step on somebody else?”
DeStefano said being a larger company will benefit Amplix as it engages with customers. New financial resources will allow the firm to hire more, especially subject matter experts.
“Size in our enterprise customers does matter. Having the ability to project manage, to engineer, to constantly touch the customer, is important,” he said. “For some of our enterprise customers, if they saw how small these organizations are that service the amount of revenue they do for those companies, it could make that customer nervous.”
And what about for dealing with vendors? First, DeStefano said suppliers will benefit from the deal. He pointed to the logistical aspect of being able to visit three of their top partners in one place.
In addition, DeStefano said Amplix will enjoy more leverage with the vendor community.
“It’s going to give us opportunity to maybe get a better percentage on commissions and maybe additional resources to help support from a customer care and commissioning standpoint. And more importantly for our customers, when something goes bump in the night we’ll get to a problem resolution much faster,” he said.
DeStefano said being a larger company will benefit Amplix as it engages with customers. New financial resources will allow the firm to hire more, especially subject matter experts.
“Size in our enterprise customers does matter. Having the ability to project manage, to engineer, to constantly touch the customer, is important,” he said. “For some of our enterprise customers, if they saw how small these organizations are that service the amount of revenue they do for those companies, it could make that customer nervous.”
And what about for dealing with vendors? First, DeStefano said suppliers will benefit from the deal. He pointed to the logistical aspect of being able to visit three of their top partners in one place.
In addition, DeStefano said Amplix will enjoy more leverage with the vendor community.
“It’s going to give us opportunity to maybe get a better percentage on commissions and maybe additional resources to help support from a customer care and commissioning standpoint. And more importantly for our customers, when something goes bump in the night we’ll get to a problem resolution much faster,” he said.
Massachusetts-based technology advisory firms ROI Communications, Blue Front Technology Group and allConnex are joining forces under one banner as Amplix.
The three agencies have agreed to a merger backed by Gemspring Capital Management. The deal closed on Nov. 15, creating a combined agency that its leaders describe as one of the largest partners in the U.S. Amplix CEO and former ROI Communications CEO Joe DeStefano tells Channel Futures that the firm will corner the New England market as it cross-sells into its existing customer bases and expands into new accounts across the country.
ROI’s Joe DeStefano
“Being able to cross-sell to those organizations is extremely important, extremely valuable to our financial partner and extremely valuable to our customers,” DeStefano told Channel Futures. “And having subject-matter expertise in different technology silos that we all have independently and using best practices for those customers is going to be invaluable.”
Blue Front CEO Dan Passacantilli will work as chief strategy officer for Amplix, and allConnex managing partners Steve King and Jamie Kuzman will serve as chief development officer and chief administrative officer, respectively. ROI president Dan Gill will work as president.
Gemspring purchased a majority interest in the company. The Connecticut-based midmarket private equity firm targets companies of $10 million-$500 million in annual revenue.
Bank Street Group financially advised them on the deal, while Nixon Peabody provided legal advisement. Kirkland & Ellis served as Gemspring’s legal advisors.
DeStefano spoke to Channel Futures about why Amplix’s foundation differs significantly from other partners mergers and acquisitions.
Scroll through the 12 images above to hear his perspective as well as details about the combined company.
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