What’s in a Name? Channel Partner Types and Positioning for M&A

… rushed toward a new challenge, a new customer, a new project, without focusing on offering services around what they had installed. Developing a managed services practice requires process, discipline and repetitive activities – generally something less interesting to more creative organizations.

MSPs and cloud providers have more often been founded by technical people with limited sales or management experience. The profile of their sales organizations is mostly technical, while some of the salespeople are from outside the industry (insurance, health care, etc.). Historically, MSPs have had a sales handicap vs. SIs when it comes to winning new customers. Many new projects still start with a product buildout, and services follow once the products have been installed. Due to the lack of relationships with manufacturers (Cisco, Dell, HP, Avaya, etc.), where many new opportunities originate, it can be more difficult for MSPs to get leads about future projects. This is especially true since they have a small and more technical sales force; by the time services becomes a topic for a given project, the SI is well-positioned because it has already established a relationship with that customer.

4. Age

Many VAR and SI founders are approaching retirement age, while the average age of MSP owners is generally lower. Although there is and will continue to be strategically motivated consolidation in the MSP space, we expect more VARs and SIs to be ready to sell, relative to their total number, in the coming years.

5. Sales

Experienced buyers of IT companies often use a simple yet effective method to better assess a company’s culture: the sales commission plan. The comp plan is a critical element when evaluating a fit between two companies, because changing a comp plan too drastically is something any experienced sales manager prefers to avoid. The comp plan reveals a lot about:

• company goals.
• if a company is more sales, marketing or technically focused.
• if it values more winning new customers vs. developing existing ones.
• whether it is more team or individual centered.
• how it hires and develops top performers, etc.

While comp plans can vary from company to company, the differences will be more obvious between the different business models.

In part two of this article, we will discuss options that channel companies with different business models should consider when preparing for an M&A event.

Cristian Anastasiu has participated in more than 80 transactions involving sellers with revenue in the $5 million to $150 million range in areas such as IT services, software applications, managed services, IT staffing, cloud technologies, SaaS, IT security, networking, data center and other technology and engineering areas. His experience includes acquiring and integrating companies for Cisco, where he also was director of worldwide sales operations. Follow him on LinkedIn.