Why, How, When MSPs Should Think About Acquisition
US Teks founder and former CEO Paul Franks recently sold his managed service provider (MSP) business last month to NetGain Technologies, an MSPmentor 100 company, a move that he said took his company to the next level. But why did Franks choose sell?
Does he have advice for other MSPs looking to go the same route? And what plans does he have for his own future? We spoke with Franks on the acquisition in this MSPmentor exclusive.
CJ: Were there any other companies interested in US Teks? If so, why go with NetGain Technologies?
PF: Yes, we had three other companies pursuing us at one point or another. NetGain seemed to fit our culture better than the other companies that were talking to us. They wanted to retain all employees, which was my number one priority if I were to do the deal. If I did not make sure all the team was retained, I would have felt like I let down the team that got us to this point in the first place. US Teks, like NetGain, is focused on a customer service first strategy and we wanted to make sure that all of our clients were also well taken care of after the acquisition was completed. If I did not make sure all the team was retained, I would have felt like I let them down.
CJ: When did you decide to sell US Teks and why?
PF: I decided to sell US Teks in the fall of 2012. Last year US Teks grew about 30 percent in MRR (monthly recurring revenue), which was the biggest growth year in our history. At around eight years in business, I knew that we needed to take the company to the next level. So I started to review the MSP landscape and where I would position US Teks for 2013. With cloud services taking off and wanting to sell more products and project services to non-MRR clients, it became clear we could achieve that goal by merging the company with a larger MSP that already had a proven track record. I also wanted to give my team more opportunities to professionally grow with a larger company.
CJ: What advice would you provide to MSP deciding whether or not to sell?
PF: First, always have an exit strategy in your business. This can consist of a target market saturation, financial goal and or a combination of both. Make sure you have a plan for when you sell the business. Will you stay on with the new company, retiring or wanting to move on to another venture in your life? The last thing you want to have is a plan for your future before selling your company.
CJ: How does an MSP go about looking for buyer? Which qualities should a potential buyer have?
PF: First, I would recommend you do some research on how to prepare your company to be sold. I would also recommend you spend some time and money having your company valued by a reputable firm that specializes in the MSP market place. You never want to go to the bargaining table not knowing what your company is worth. After you have a full grasp on the value of your business, I would then do some research to figure out who are the MSP leaders and are they publicly looking to acquire other MSP firms. Once you have that information, start calling their business development team to talk. Another way is to find companies that will work to sell your business. For me, I want to make sure that the company acquiring me has the same culture, dedication to the employees and my clients. Once the sale has gone through, you want to make sure you have positioned the new company to succeed.
CJ: You're moving on to bigger things, correct? Who are ThinkGard's prime customer base? Tell us about the company.
PF: ThinkGard is a technology risk management firm specializing in intelligent disaster recovery and business continuity planning. Our purpose is to identify and mitigate inherent risks associated with business technology — risks that could be an Achilles Heel when a disaster strikes. Through in-depth consultation, we develop solutions based solely on the specific needs of our clients which are dictated by their existing technology platform. Our services match perfectly with organizations that, due to critical demand or critical data, have zero tolerance for down time and data loss.