Martin Wolf Acquires Ohio Firm To Up M&A Ante For VARs

‘Buyers know there will be other buyers involved. They know they will need to approach the deal different than if it was a for-sale-by-owner situation. [A smaller seller] may know maybe five potential buyers. But we might know 30, including private equity firms. We press the button, and reach out to them. And we curate the list of buyers so we don’t bring in businesses just looking to kick the tires,’ says Tim Mueller, IT ExchangeNet president and CEO.

Martin Wolf Associates, a leading provider of full services including advisory and negotiation services to businesses looking to execute a merger or acquisition, on Thursday said it has done its own M&A with the acquisition of IT ExchangeNet, an Ohio-based specialist in small business channel M&A.

With the acquisition, Martin Wolf Associates gets the opportunity to expand to the larger community of small-sized solution providers looking for opportunities to become acquired by or merged into larger companies, said Marty Wolf, founder of the Scottsdale, Ariz.-based company.

The company also gets experienced talent in IT ExchangeNet, which several years ago was spun off from Martin Wolf Associates.

[Related: Selling An MSP Business? Here’s Everything You Should Know]

Martin Wolf Associates has completed 180 transactions with a total enterprise value of over $5 billion in its 20-plus years, and has closed the spin-offs of eight Fortune 500 company divisions, Wolf told CRN.

“We’ve been involved in more Solution Provider 500 transactions than anyone,” he said, referring to CRN’s annual Solution Provider 500 listing of the world’s top channel partners. “We’ve worked for or with companies like Microsoft, CDW, Insight, and ComputaCenter, as well as with Bain [Capital Private Equity], Silver Lake [Partners], and others.”

Martin Wolf Associates focuses its M&A advisory services on IT services, IT supply chain, and software companies in the $30 million to $500 million range, Wolf said.

“We have a very limited offering,” he said. “We buy and sell companies. We don’t raise debt or do limited offerings.”

IT ExchangeNet, on the other hand, focuses on companies under $20 million in revenue, with most deals running between $5 million and $20 million, said Tim Mueller, president and CEO of the Cleveland, Ohio-based company.

The two met 22 years ago when Mueller, an entrepreneur, was looking to acquire a company and went to one of Wolf’s forums as a buyer, Mueller told CRN.

“Marty told me I look more like a seller, and that there might be a bubble coming up,” he said. “So overnight, I changed to a seller. Marty brought in 30 potential buyers. That was in October of 1999. In 2000 and 2001 the dot-com bubble burst. Marty stayed as a close friend since then.”

Mueller, who going forward will serve as president of Martin Wolf Associates, in 2011 founded IT ExchangeNet with a focus on smaller M&A transactions.

“Marty focuses on $50 million to $500 million deals,” he said. “We might do a $40 million deal, but that’s an anomaly for us.”

Martin Wolf Associates has not stayed completely out of the small business M&A game. The firm has a division called LMM, or Lower Middle Market, which works on M&A deals up to about $50 million.

However, the big difference between Martin Wolf Associates and IT ExchangeNet is in the kind of services they offer. Martin Wolf Associates offers full merger and acquisition advisory services to its larger clients and to its smaller clients via LMM. This includes negotiating on behalf of clients.

IT ExchangeNet, on the other hand, is more of a self-service company which does not offer advisory services or negotiation help, but provides its clients with M&A boot camps and training, Mueller said.

“Over time, Martin Wolf Associates has focused on larger and larger transactions,” Wolf said. “With LMM and IT ExchangeNet, we’re now fully involved in the lower middle market with both a bundled and unbundled approach.”

The two did a total of 16 deals in all of 2020, including nine deals in the last 40 days of the year. Those deals were done separately, Mueller said.

One of those deals was the acquisition of Virtual Graffiti, an Irvine, Calif.-based solution provider by BlueAlly, a Cary, N.C.-based solution provider which was itself acquired late year by Source Capital, a private equity firm. BlueAlly was ranked number 169 on the CRN 2020 Solution Provider list, while Virtual Graffiti was listed at number 303.

Virtual Graffiti Founder and CEO Hillel Sackstein told CRN that he met Mueller and Wolf about nine years ago, which is when he started getting a lot of interest from other solution providers looking to potentially acquire his company.

“As I got calls about getting acquired, I realized I needed help,” Sackstein told CRN. “I didn’t understand these things. There were a lot of terms I didn’t know.”

Sackstein started working with Mueller at that time, and the years of effort paid off in December when Virtual Graffiti was acquired, Sackstein said.

“I wanted someone on my side to bring me opportunities,” he said. “I knew Tim would get me in the door with large companies or private equity companies. We were very patient. Over nine years, I spoke to and signed NDAs (non-disclosure agreements) with over 200 companies, including strategic buyers and private equity. Tim was key to getting me to the table with Source Capital.”

Sackstein said that Mueller might bring him a dozen NDAs from companies looking for acquisitions at a time. He also said that when a potential acquirer contacted him, he put that company in touch with Mueller.

“I’m happy I stuck with Tim, and Tim’s happy he stuck with me, because we got a really great result,” he said. “Marty and Tim are a great combination. It’s a fantastic plan they have.”

Justin Kallhoff, the founder of Infogressive, a managed security service provider which in 2020 was acquired by Chicago-based Ascend Technologies with the help of IT ExchangeNet, told CRN that he worked with Mueller after an introduction by Wolf.

“They were probably pounding pavement looking for business at the time,” Kallhoff said. “I had been inundated with calls from people who do what Marty and Tim do, especially in the last two-and-a-half years. I picked Tim because of his personality and what he offered.”

Kallhoff said he became interested in selling his company after being educated by friends who were also entrepreneurs and who had already done their exits.

“Three years ago, I figured I should listen just in case,” he said. “Two-and-a-half years ago, I stared looking. I considered both taking capital and getting acquired, whichever provided enough money to make it work.”

Kallhoff ended up with his company being acquired by Ascend Technologies because of Infogressive’s security capabilities, and he is now Ascend’s chief cybersecurity officer.

“Tim did a good job of understanding what was important to me and my life,” he said. “For entrepreneurs, who have built a successful business, there are hard decisions to make. It’s emotional. But Tim had done it himself, which helped him understand the desire and the emotion. And it was important to get his help understanding the financing.”

For Wolf, acquiring IT ExchangeNet was important to help tackle a large community of smaller channel businesses who need help with merger and acquisition activities.

“In midmarket transactions, the most important moves are to find a buyer and set up an auction basis to look for multiple offers,” he said. “Most companies in this space don’t know the buyers. We do. Potential buyers take our calls and answer our emails.”

When companies like Martin Wolf Associates or IT ExchangeNet get involve, it sends a message to buyers, Mueller said.

“Buyers know there will be other buyers involved,” he said. “They know they will need to approach the deal different than if it was a for-sale-by-owner situation. If a smaller seller reaches out, it may know maybe five potential buyers. But we might know 30, including private equity firms. We press the button, and reach out to them. And we curate the list of buyers so we don’t bring in businesses just looking to kick the tires.”

Interest in selling solution provider businesses slowed down early in the COVID-19 coronavirus pandemic, but by June had ramped up again, and 2021 looks like it will be busy for deals, Mueller said.

“We’re seeing hundreds of baby boomer owners looking to exit and unlock the value of their businesses,” he said. “And strategic buyers and private equity firms have been flooding our email box looking for opportunities. This could be a banner year.”