Private Equity Firm Invests In N-able, Managed Services

Private Equity Firm Invests In N-able, Managed Services

Accel-KKR, a private equity firm, has made a minority investment in N-able Technologies, the managed services software provider. The news comes one week after Zenith Infotech spun off Zenith RMM in a private equity deal. The big questions: How will N-able Technologies leverage the cash infusion? And is the RMM (remote monitoring and management) software market set to accelerate or consolidation?

Note: N-able planned to announce the news on Oct. 6. But MSPmentor is running the story now (Oct. 5) because specific details have now surfaced elsewhere on the web, and the confirmed details spread across social media. The private equity news had been rumored since September.

CEO Perspectives

N-able Technologies did not disclose how much money Accel-KKR invested in the company. CEO Gavin Garbutt confirmed that the Accel-KKR investment involves a minority position in N-able Technologies. Accel-KKR gains two seats on N-able's board of directors, which now has eight members. N-able's management team remains in place.

In a phone conversation, Garbutt said N-able will march forward with a three-year plan to grow its managed services software business, blending freemium software with paid offerings for MSPs. Note: The three-year plan should not be considered an actual exit plan. Each year, Garbutt and N-able's board always update and revise a longer-term, ongoing three-year strategy, Garbutt mentioned.

Garbutt said he started exploring corporate finance options about two quarters ago -- exploring everything from an IPO to a private equity relationship. One big goal: Grow N-able's international footprint; roughly 40 percent of N-able's revenues come from outside North America. N-able expects the private equity infusion to accelerate that growth.

Dollars and Cents

In recent months, N-able has experienced exponential growth in terms of the number of endpoints the company's software now manages. But it's difficult for MSPmentor to connect the dots between N-able's growing installed base of software and actual revenue growth figures. As a privately held company, N-able does not disclose such financial metrics but Garbutt told me N-able is profitable. "We are profitable," said Garbutt. "I  can't talk on revenue numbers. But it's... I can certainly say business is going unbelievably well."

Potential Software Partners, More M&A?

Longer term, I suspect N-able may explore partnerships across Accel-KKR's private equity portfolio. In my opinion, some portfolio names worth tracking include Endurance International (an SMB cloud specialist), Kana Software (service experience management) and Layered Technologies (managed dedicated hosting). Garbutt didn't mention potential software partners by name but he confirmed N-able will explore partnerships across the Accel-KKR portfolio.

There are also signs that N-able will consider making investments and/or acquisitions. It sounds like N-able has already made an acquisition -- very quietly -- and will release a product related to the acquisition during the N-able Partner Summit (Oct. 12-14, Scottsdale, Ariz.).

RMM Software Market: Growing Or Consolidating?

As mentioned, this is the second major private equity investment targeting the RMM (remote monitoring and management) software market within the past week. Also, we're seeing mergers, acquisitions, private equity and venture capital activity in the cloud storage and online backup markets.

Bottom line: We're reached an inflection point in the managed services software market. I believe most of the major RMM software providers remain in growth mode. But many of the software players are trying to figure out how to (A) grow the market rather than (B) battling for market share in the established pool of MSPs.

Generally speaking, I think the RMM market will ultimately consolidate around fewer players that have deep pockets. Zenith RMM and N-able Technologies have embraced private equity to drive growth and weather the coming storm. I believe other players like Kaseya and LabTech Software (backed by ConnectWise Capital) won't pursue investment money and plan to leverage their existing cash flow to grow. I'm checking around to see if additional RMM players are planning private equity or alternative financial moves.

Another key question: How long is Accel-KKR's investment horizon with N-able? Garbutt indicated that the Accel-KKR-N-able relationship is a long-term engagement. Check Accel-KKR's track record and you'll discover many of their investments involve multi-year engagements. But we'll be poking around to see if there are specific time horizons worth mentioning.
TAGS: Financing
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