The 20’s MSP M&A Spree: Six In A Month, Dozens More To Come

‘The owners get a position in The 20, depending on their specialty, MSP owners now are like the butcher, the baker and the candlestick maker, doing everything. But that’s not good. We want to put these people in the right place,’ says The 20 MSP CEO Tim Conkle.

An MSP that provides a full range of managed services tools to other MSPs and with an eye on acquisitions has closed six deals this week and promises more to come.

Plano, Texas-based The 20 MSP Group brings a unique twist to the MSP merger and acquisition business. The company provides a full range of services other MSPs can take advantage of, including its own Network Operations Center, Security Operations Center and 24x7 help desk, said CEO Tim Conkle.

Those independent MSPs are part of The 20 MSP Group, which provides the services they can take to customers. However, some of those MSPs will eventually be acquired to become part of a single entity, The 20, Conkle told CRN.

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“To get acquired, an MSP first needs to hit the million-dollar revenue level,” he said. “We’ll take MSPs who are just starting out, and 18 months later they may be at $2 million-plus. If they’re under $1 million in revenue, they’re too expensive to acquire. But my goal is to acquire them all.”

It is an aggressive plan. Conkle said his company currently has another seven MSPs lined up to be acquired late this month or early October.

“We can stomach five acquisitions per month, each at $1 million-plus,” he said. “I think we’ll do this for the next 36 months. We already have 40 to 50 MSPs ready to acquire.”

The six MSPs acquired in the past month are Troy, Ohio-based Cirrus Technologies; Wauwatosa, Wis.-based Ingrain IT; San Antonio-based Monroy IT Services; Santa Cruz, Calif.-based Network Management Solutions; Madison, Wis.-based Peterson Technology Group; and Boca Raton, Fla.-based Your IT Group.

They followed Kirkland, Wash.-based Stratocent Technologies, which The 20 acquired early this year as a test acquisition, Conkle said.

Conkle said some may wonder why The 20 doesn’t purchase the MSPs when they are smaller and would cost less.

“If they’re not at $1 million, they may not want to grow,” he said. “My goal is to make 500 millionaires. We look at their strategies first, and then at the $1 million revenue. There are lots of million-dollar-revenue MSPs. But we’re also looking at getting strategists, people who can run a region.”

For those smaller MSPs that meet the requirements of The 20, they get the opportunity to not only be part of a bigger company but also see the value of their business quickly grow, Conkle said.

“I can take a $1 million MSP, which probably has 20 percent EBITDA or $200,000, and bring it into my company, which has a 12X multiple,” he said. “So that $200,000 becomes $2.4 million. These guys get a second bite of the apple.”

The 20 is approaching MSP acquisitions in a way that private equity companies can’t, Conkle said.

“The typical private equity firm needs time to find the right targets,” he said. “But I’m already doing business with these MSPs. I know the people. And we make sure the sellers keep some equity at The 20 level, not just at the local level. I’m trying to line them up because they’re all important.”

Private equity firms can do due diligence on potential acquisitions, Conkle said.

“But they don’t know the culture or the tools the MSPs use,” he said. “We know all that before we buy. It’s like a horse race where just before you hit the finish line, you pause the race and change the horse if you want.”

There are currently about 160 to 170 MSPs in The 20 MSP Group, which for them acts in a similar fashion to a franchise, Conkle said.

“But we don’t like to say ‘franchise,’” he said. “There’s so many laws around that concept. We like to say ‘co-op.’ But it’s just a different spelling.”

Those who eventually become part of The 20 via acquisition will become part of a single company with a shared brand, team and vision, he said.

“And the owners get a position in The 20, depending on their specialty,” he said. “MSP owners now are like the butcher, the baker and the candlestick maker, doing everything. But that’s not good. We want to put these people in the right place. If they’re sales-oriented, we will make them part of our sales team. If they’re tech-oriented, we’ll make them part of the tech team.”

Unlike many of the larger MSP platform companies that are acquiring multiple smaller MSPs to build a nationwide practice, The 20 does not have private equity funding. Instead, Conkle said, he has pretty much gone the self-funding route, using the proceeds from the sale in early 2020 of his former company, Unified Communications-as-a-Service provider Cytracom, to Sverica Capital Management.

The 20’s acquisitions are done via a combination of cash flow and debt financing, Conkle said. However, he said, the company does work with private equity firm Pinecrest Capital Partners, which provides financial advice on acquisitions and financing.