10 Solution Providers That Have Attracted Private Equity
Going Private
This week’s acquisition of Pomeroy, a managed service provider that ranks 44th on CRN’s Solution Provider 500, marked another example of the presence of private equity firms in the channel.
Pomeroy was acquired by Clearlake Capital, which now has several technology companies – both vendors and channel partners – in its portfolio.
Martin Wolf, president of Martinwolf M&A Advisors, of Walnut Creek, Calif., a channel investment advisor, called the impact of private-equity investment in the channel today ’huge,’ especially because owner-operated companies haven’t been able to land public financing in today’s market. ’It’s landscape-changing,’ he said of private-equity buys when commenting this week on the Pomeroy deal. ’It’s a phenomenon that doesn’t seem to be going away for the foreseeable future.’
The following are snapshots of 10 recent private-equity deals with solution providers.
Pomeroy
Headquarters: Hebron, Ky.
2015 CRN Solution Provider 500 Rank: 44
Acquired By: Clearlake Capital
Date Deal Was Announced: Oct. 26, 2015
Summary: Managed service provider Pomeroy is being acquired by Clearlake and merging with Tolt Solutions, which Clearlake had already acquired in 2014. Tolt, based in Taylors, S.C., serves such industries as retail and food services. Together, Tolt and Pomeroy will become a nearly $1 billion channel titan with more than 4,000 employees. While the two companies will retain their names publicly, they’ll be merged organizationally within Clearlake as Pomeroy Group when the deal closes, which is expected before year’s end.
NWN
Headquarters: Waltham, Mass.
2015 CRN Solution Provider 500 Rank : 72
Investor: New State Capital Partners
Date Deal Was Announced: Oct. 19, 2015
Summary: NWN, a $350 million solution provider, sold a majority stake to New State Capital Partners in hopes of growing into a $1 billion cloud power. NWN CEO Mont Phelps, said the deal brings the financial resources the company needs to compete against multi-billion-dollar telcos and cloud service providers, noting that the cloud business "is a big boy game." It was the first technology investment for New York-based New State, which holds key investments in health care and manufacturing companies. Under the terms of the deal, Phelps, Managing Director Jane Linder, and the rest of the NWN senior management team will remain in place and retain a substantial stake in the company.
Atlantix Global Systems
Headquarters: Norcross, Ga.
Acquired By: Millstein & Co.
2015 CRN Solution Provider 500 Rank : 155
Date Of Deal: Oct. 12, 2015
Summary: Atlantix, previously the refurbished hardware resale subsidiary of Presidio, was sold by its parent to Millstein & Co., a private equity firm that also acquired DLT Solutions in January. The Atlantix deal was motivated by Presidio’s refocusing of its business on managed services, which left Atlantix outside that core. Presidio CEO Bob Cagnazzi said he believes Millstein can "take [Atlantix] to the next level," and scale the reseller so it can maximize profits.
Sirius Computer Solutions
Headquarters: San Antonio
Acquired By: Kelso & Co.
2015 CRN Solution Provider 500 Rank : 28
Date Of Deal: Sept. 3, 2015
Summary: Kelso & Co.’s announcement of its intent to buy a majority stake in Sirius Computer Solutions made it possible for the partner to be more aggressive in acquiring firms with expertise in converged infrastructure and services, Joe Mertens, Sirius president and CEO, told CRN at the time. Sirius plans to continue on a pace of at least two acquisitions a year under Kelso, Mertens said, and also plans to use Kelso's money to invest more heavily in its own capabilities around managed services and IBM software services. Kelso acquired the equity interest from Thoma Bravo and Harvey Najim, who retired as chairman 35 years after founding Sirius.
SoftwareONE
Headquarters: Waukesha, Wis.
Investor: KKR
2015 CRN Solution Provider 500 Rank : 14
Date Of Deal: Aug. 17, 2015
Summary: KKR paid $3.3 billion for a 25 percent minority stake in solution provider SoftwareONE to provide capital for future mergers and acquisitions in the United States and Asia, as well as allow the company to provide more cloud and value-added services. The four founding partners of SoftwareONE are retaining a 75 percent stake in the company and continue to have sole responsibility for managing the firm. SoftwareONE has been active in the M&A market as the ranks of licensing solution providers – the only Microsoft solution providers authorized to handle software volume licensing transactions – continue to dwindle. SoftwareONE bought CompuCom's Microsoft software licensing business in March.
New Signature
Headquarters: Washington D.C.
Investor: Columbia Capital
2015 CRN Solution Provider 500 Rank: N/A
Date Of Deal: April 22, 2015
Summary: New Signature received $35 million and brought in several new executives from private equity firm Columbia Capital to help the fast-growing solution provider expand its physical footprint outside the Northeast and increase its technical capabilities around Microsoft Azure, Office 365 and Dynamics CRM online. Chris Hertz, co-founder and president of New Signature, told CRN that he expects the money will help the company boost its headcount from 90 to at least 180 by 2017 and enable New Signature to hit $500 million in annual revenue by 2020. As part of the deal, Columbia also provided New Signature with a new CEO, chairman of the board and chief financial officer.
DLT Solutions
Headquarters: Herndon, Va.
Acquired By: Millstein & Co.
2015 CRN Solution Provider 500 Rank : 35
Date Of Deal: Jan. 30, 2015
Summary: DLT became renowned in the channel as a premier public sector solution provider and was previously majority-owned by TZP Capitol Group before Millstein & Co. took over earlier this year. As part of the deal, Millstein installed Alan Marc Smith as president and CEO, replacing 10-year veteran Rick Marcotte, who became vice chairman of the DLT board. Millstein said it hopes to continue DLT's work, focusing on expanding cloud solutions in the public sector, and building on its extensive federal experience at the IRS, Office of Management and Budget, and Small Business Administration.
Presidio
Headquarters: New York
Acquired By: Apollo Global Management
2015 CRN Solution Provider 500 Rank : 21
Date Of Deal: Dec. 1, 2014
Summary: Presidio, one of Cisco's largest resellers, changed ownership when Apollo Global Management bought Presidio’s parent company, American Securities, in April 2011. Presidio's CEO, Bob Cagnazzi, said the company's relationship with American Securities allowed Presidio to grow through – among other things -- its acquisitions of BlueWater Communications and INX. Apollo partner Mathew Nord said the company is looking to continue Presidio's growth trajectory.
ConvergeOne
Headquarters: Eagan, Minn.
2015 CRN Solution Provider 500 Rank: N/A
Acquired By: Clearlake Capital
Date Of Deal: May 2014
Summary: ConvergeOne -- one of the world's largest Avaya channel partners -- was acquired by Clearlake Capital after having been owned by Genstar Capital for seven years. ConvergeOne consists of several business units that include managed services and software, ConvergeOne is also a partner with Cisco and IBM. Its CEO, John McKenna, said the company wanted to leverage Clearlake's "substantial resources" to further the company's business practices, which it did following acquisitions of Avaya platinum partner Sunturn and Cisco Gold partner Mountain States Networking in May, unifying the entire company under one name on Oct. 19.
Accuvant (now Optiv Security)
Headquarters: Denver
Investor: Blackstone Group
2015 CRN Solution Provider 500 Rank : 26 (after merger with FishNet Security)
Date Of Deal: March 11, 2014
Summary: Security systems integrator Accuvant ending up supercharging its business by selling a majority stake to the Blackstone Group last year. Dave Johnson, senior managing director in Blackstone's Private Equity Group, said at the time that Accuvant could "become the dominant player in its rapidly growing and important industry." That's exactly what happened in November 2014, when Blackstone brought Accuvant and FishNet Security together to create the world’s largest pure-play security solution provider with 1,500 employees and $1.5 billion in annual sales. Blackstone is the majority owner of the combined entity, now called Optiv Security.