dan_holt_heit_managed_services

Here’s an email exchange that I had with Holt, an MSPmentor 250 member, a few hours ago (Aug. 11, 2011).

MSPmentor: When did you start to truly consider the CSI deal?

Holt: Jeff [Simpler] & I where working hard on partnering with the major technology solutions providers & application providers in the financial industry to basically get the channel going.  CSI was a HEIT target for partnering and a director on our board made the initial introductions.  It was all about partnering.  Then, the CEO of CSI, Steve Powless, reached out to share a grander plan and vision.  We worked out a term sheet at the end of June, completed due diligence and legal paperwork in July and the beginning of August, and now here we are.  CSI moves fast.

MSPmentor: What’s your message to your existing customers about the deal?

Holt: It is real simple.

MSPmentor: Why do you think this deal will work?

Holt: The #1 reason is leadership at CSI; CSI has a reputation of very successful acquisitions.  They simply treat the employees right and have already shown this through our process.  Culture is the most important part of a merger or acquisition.  We know that it will not be the same, and we also know that it is a very positive culture.

Second, HEIT can provide additional services for CSI clients, and we believe it is great for HEIT clients as well.

Third, Innovation: To continue the cloud movement size & scale matter.  We can now do more in the financial industry than any of our (HEIT) competitors with the cloud.

MSPmentor: Is Jeff Simpler joining CSI too? (Background for readers: Simpler joined HEIT as part of the HEIT-Simpler-Webb merger in 2010)

Holt: Yes, Jeff is staying with CSI as the Chief Business Development Officer in the Managed Services Division.  It is possible that titles will change.

MSPmentor: How many employees does HEIT have and are they all joining CSI?

Holt: We have just under 100 employees and all but a few back office positions will move forward.  We also carved out a portion of the business (non-MRR) for a couple of folks that already started another corporation.  All of Operations (engineers) will join CSI, and we are still hiring.

Side Notes

I didn’t ask Holt about financial terms of the deal, nor did we discuss valuation levels. CSI is a publicly held company but CSI did not disclose financial terms of the HEIT acquisition, which is expected to close on September 1. MSPmentor will be watching SEC filings to see if CSI discloses any HEIT financial details down the road.

Also, I don’t want to “hype” the CSI-HEIT deal. I’ve seen plenty of mergers and acquisitions fail over the years. But there are some clear synergies between CSI and HEIT. I’d characterize the deal as a “tuck-in.” Instead of merging HEIT’s operations into a CSI organization, it’s clear that HEIT becomes a dedicated managed services business unit within CSI.

In theory, HEIT will gain the best of both worlds… CSI’s financial muscle and access to CSI’s client list. HEIT will remain focused on its core managed services and cloud services efforts, rather than trying to master CSI’s services portfolio. MSPmentor will be watching to see if CSI and HEIT can execute on that game plan.