Well, how’s this for a headline? A 15-way MSP acquisition deal. From the press release that was issued today.
Alfar Capital and Walter Capital Partners have completed the acquisition of MSP Corp, a renowned Canadian managed service provider group, in a transaction of over $100M. After the acquisition MSP Corp will merge with Groupe Access, a leading managed service provider of technology and cybersecurity solutions. The combined entity, called MSP Corp, creates a national Canadian platform of managed services poised to lead the industry in digital transformation, cloud computing, and cybersecurity solutions.
So, translating this. These two equity groups bought MSP Corp, which has 10 MSPs in it, and you might remember I’ve interviewed on the show. Then, those groups bought two more MSPs and finally smashed the whole thing together to make one single MSP. The companies are all across Canada, and the new company will have over 400 employees.
So I asked and had Ravi Ramharak back on the show. Why do it this way?
The reason for the methodology is that we did amalgamate legally. From a legal perspective, we are now one company with a bunch of different front trade names that we operate under. The logic behind the way we did it is mostly tax related, to be quite frank. From a tax perspective, this made the most sense. When you have so many different asset values, like at Fair Market, this was the structure that made the most sense, which was MSP Corp exiting and then everybody reinvesting and then doing the merger. It made a very efficient tax structure, at least by Canadian laws. So I wouldn’t say there was much planning behind it except for the tax guys at the end of the day were like, this is the best way to do this.
There’s usually more to a thesis than – and part of the reasoning is about the hiring.
So bringing on Groupe Access is just one more MSP in our group and we’ve managed to get a CEO as well, which to me was, we talk about this all the time was a big lacking point for us because although I’m sure I’m good at M&A and sure I can fix computers and servers at talk to the bank, I’m not a leadership. I’m not trained, haven’t been in leadership roles in that large capacity before. Bringing on Habib who’s not only built Groupe Access from scratch, but understands national sales, national account management, integration really brings the level of maturity to the company.
Finally, what’s success look like a year from now:
We have one unified payroll system, one unified HRS system and a unified vendor management platform. To me, six months from now, we hit all those targets, which is what we’re on target for, we did a great job mean now. Now from a visual point of view, to most people, you are one company and you have different divisions and they service different things. But at the end of the day, they all kind of do the same thing with bits like delivery based on regionality. Right? I think that’s a big win from my point of view. Things might change obviously in the next six months, but as of right now, I think that’s the delivery message we give out to everybody
It’s essential to consider the reason for a unique deal like this.
Between 70 and 90 percent of acquisitions fail, and they generally fail because of the people problems just integrating two companies. Just two. This says fifteen ways! Let’s assume the single MSP Corp was already integrated – you’re still doing a five-way integration. That’s, you know, a lot! Think about it – every one of those interactions been organizations is a relationship to manage.
More than raw dollars, the two reasons for this deal appear to be leadership and tax. That’s a critical insight.
In the larger discussion with Ravi, I noted that this is not the end but the beginning. The entrepreneurs involved has their exit… but now the work begins. We’ll see if the gamble pays off for them.