Flex Equity Buys Logical Maintenance Solutions As Platform To Acquire Other MSPs

‘[Logical Maintenance Solutions] is now our platform for the managed services business,’ says Sameer Mittal, Flex Equity managing partner. ‘We will use it to acquire other MSPs in the future.’

The push by private equity into the managed services business continued Thursday with Flex Equity acquiring Logical Maintenance Solutions, an Irvine, Calif.-based MSP.

Flex Equity, a Dallas-based multi-family office and strategic investor in the midmarket business environment, acquired Logical Maintenance Solutions as a platform on which to make further acquisitions in the market, said Sameer Mittal, managing partner at Flex Equity and now the chairman and president of Logical Maintenance Solutions.

Flex Equity acquired Logical Maintenance Solutions, a 45-year-old MSP that provides services across the U.S. and Canada, for an undisclosed sum.

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With the acquisition, Flex Equity has a platform for building a larger MSP by eventually acquiring five to 10 more smaller MSPs, Mittal told CRN.

“[Logical Maintenance Solutions] is now our platform for the managed services business,” he said. “We will use it to acquire other MSPs in the future.”

Flex Equity was looking for an industry that was ripe for investment and found that in the MSP space.

“When we look at possible deals, we look at different industries,” he said. “We look at opportunities, assets and the team. We were considering several potential deals, and [Logical Maintenance Solutions] came to the top. We like the flexible cost model of managed services and the ability to scale up and down. And that’s important to me, because I came from a manufacturing background where costs are fixed. I like the concept of managed services.”

Logical Maintenance Solutions has a strong services platform and has several employees who have spent over 15 years with the company, including a few with over 40 years of seniority, Mittal said.

“[Logical Maintenance Solutions] had a huge family culture,” he said. “But that’s the challenge: turning a family culture into a professional culture. Their people cared about the company. But we are putting in place things to help increase their professionalism, including CRM to monitor sales, outsourced HR management to increase governance, and new sales consultants.”

Flex Equity is also bringing in the ability to manage full-time employees and contract workers, Mittal said.

“If business is up, we can add more full-time people, or add more 1099s,” he said, referring to the tax forms used with contract workers. “We can scale up and down as needed.”

When it comes to future acquisitions in the MSP business, Mittal said he will consider such factors as stable revenue and significant long-term contracts, and companies that are not burning cash.

“Burning a little cash is OK,” he said. “But we want something that is easy to understand.”

Given that Flex Equity has just acquired Logical Maintenance Solutions, Mittal said it is still too early to be thinking about an exit strategy.

“The traditional investment time is five to seven years,” he said. “It depends on the market. Today, the market is super hot, so it could be sooner. I expect to acquire five to 10 companies during this time frame.”

Logical Maintenance Solutions will continue with much of its staff intact, including the chief financial officer, who is also a co-founder, Mittal said.

CEO Craig Youngblood, who was also the majority owner, has exited. Stepping in as the new CEO is Stacey Powell, who previously was CEO at Ovation Workplace Services, a Las Vegas-based MSP and cloud services provider.

Private equity has become a key part of a movement to consolidate the MSP business.

Several deals have been unveiled in just the last few months, including West Hartford, Conn.-based CompassMSP, which acquired IT Direct with the help of its private equity backer and a bank, and Electric, a New York-based MSP which, after making its first acquisition last year, recently closed a $40 million funding round as a prelude to making more acquisitions.