Christopher Vollmond-Carstens, M&A, NTIVA
In this episode of WIN ("What's Important Now?"), host Carrie Richardson dives into the world of mergers and acquisitions (M&As) within the managed service provider (MSP) industry with Christopher Vollmond-Carstens, M&A Director at NTIVA.
Christopher shares invaluable insights on preparing MSPs for acquisition, the importance of cultural alignment, and the key attributes NTIVA looks for in potential acquisitions. Whether you're an MSP owner considering a sale or simply interested in the M&A landscape, this episode offers practical advice and strategic insights.
Episode Highlights:
- Introduction to NTIVA and its M&A strategy
- The concept of "empire builders" in the MSP space
- Key factors that make NTIVA an attractive partner for MSPs
- Essential criteria for MSPs to be considered for acquisition
- Red flags and deal breakers in potential acquisitions
- Preparing your MSP for sale: Short-term and long-term strategies
- The importance of operational maturity and leadership
- Impact of industry specialization on valuation
- Understanding the M&A process timeline and relationship building
- Current trends and future outlook in the MSP M&A space
Notable Quotes:
- Christopher Vollmond-Carstens: "We exist to grow each other. Technology is the accelerator, but people are at the core."
- Carrie Richardson: "You're not looking for a boat with a hole in the bottom of it."
- Christopher Vollmond-Carstens: "This is not a shotgun Hollywood wedding. This is something that should take time to establish and develop."
Guest Information:
Christopher Vollmond-Carstens is the M&A Director at NTIVA. With a strategic focus on expanding NTIVA's market presence through acquisitions, Christopher brings a wealth of experience in navigating the complexities of M&As in the MSP space.
Links and Resources Mentioned:
- NTIVA Website: NTIVA
- Christopher Vollmand-Carstens LinkedIn: Christopher Vollmand-Carstens
- Service Leadership Industry Benchmarking: Service Leadership
#MSPMergers #BusinessGrowth #NTIVA #MergersAndAcquisitions #ExitStrategy #Leadership #OperationalMaturity #IndustrySpecialization #Podcast
Carrie Richardson and Ian Richardson host the WIN Podcast - What's Important Now?
Serial entrepreneurs, life partners and business partners, they have successfully exited from multiple businesses (IT, call center, real estate, marketing) and they help other business owners create their own versions of success.
Ian is certified in Eagle Center For Leadership Making A Difference, Paterson StratOp, and LifePlan.
Carrie has helped create and execute successful outbound sales strategies for over 1200 technology-focused businesses including MSPs, manufacturers, distributors and SaaS firms.
Learn more at www.foxcrowgroup.com
Book time with either of them here: https://randr.consulting/connect
Be a guest on WIN! We host successful entrepreneurs who share advice with other entrepreneurs on how to build, grow or sell a business using examples from their own experience.
Carrie and Ian Richardson are partners in Richardson & Richardson Consulting.
Carrie is the founder of the content collaboration agency, Croocial.
Ian is the founder of the strategic consulting firm, Fox and Crow Group.
Carrie Richardson: Good afternoon, everybody.
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Thank you for joining me today.
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My name is Carrie Richardson, and I the host of WIN.
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What's Important Now?
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Today I'm asking that question to Christopher Vollmand-
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Carstens, who is the M& A director for NTIVA.
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How are you doing today, CVC?
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Christopher Vollmand-Carste: I'm doing great.
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Thanks.
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Thanks for having me, Carrie.
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I know it's been a little while since we last chatted, but I'm
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excited to be back on with you and hopefully it won't be too
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long before I get to spend some time with both you and Ian
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together.
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Carrie Richardson: So we're going to talk about a topic that
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is, of course, near and dear to your heart and near and dear to
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the entire channel's heart lately: we're going to talk
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about mergers and acquisitions in the MSP space, specifically
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about how MSPs can prepare their businesses to be attractive to
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companies like NTIVA, which we've all nicknamed empire
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builders at this point.
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So let's talk a little bit about how you got that nickname and
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why we describe it like that.
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What's an empire builder?
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Christopher Vollmand-Carstens: I think the way to think about it
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most clearly is we're a business that has spent a majority of our
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history growing by typical means, organic growth referrals
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and the like.
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Then in 2016, Stephen Friedkin, our founder and CEO of NTIVA,
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took the decision to bring in some outside capital.
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In the form of investment in our business to really help to scale
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and grow much more rapidly our organization.
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And so from that point in time, after making investments in
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leadership team as well as building out our sales and
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marketing practice more substantially we also embarked
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on an aggressive M and a strategy, giving us an
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opportunity to grow not just in the region, which we are founded
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in the D.
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C.
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Area, but expand into new markets and geographies
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throughout the U.
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S.
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And it's that last piece that M and a angle that has really been
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probably the crux of why certain folks refer to us as empire
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builders or"scaled" MSPs.
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Over the last seven years, we've been fortunate enough to acquire
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15 businesses and expand our geographic presence.
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Across now upwards of 10 markets throughout the U.
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S.
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So that accelerated growth through acquisition is probably
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where that term comes from.
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But the way we see it is that even though we are growing quite
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aggressively via acquisition, there are some core tenets to
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that strategy that help guide us through that journey, and it all
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gets around to our desire to quote"win" at NTIVA and an all
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encompassing view to that for not just ourselves, but all the
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stakeholders and ecosystem around our organization.
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So I'm happy to talk a little bit more about that.
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Whether you're calling ourselves an empire builder or a scaled
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MSP, it is not an uncommon strategy in the market.
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There's a lot of interest in attraction to the MSP sphere and
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individuals to want to invest and be part of, the growth and
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opportunities.
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So I think, it's an increasingly common place to be to see
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multiple parties out there looking to do acquisitions
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throughout the US and even globally.
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Carrie Richardson: As a managed service provider looking to
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exit, you've got a lot of options.
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What are the key factors that make NTIVA an attractive partner
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for an MSP looking to exit?
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Christopher Vollmand-Carstens: I think it really centers around
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how we define winning at NTIVA.
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And in doing so, it also starts to bring up several important
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questions that a prospective seller, an MSP owner should be
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contemplating as I think about a transition for their business,
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because ultimately, every business will transition at some
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point in time.
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The preference is to do it while you are vertical.
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As opposed to horizontal.
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So if you can be intentional in that journey and find the
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partner that is best suited for, your hopes, dreams, wishes for
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yourself, whether it's financially, culturally, your
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people, your clients that will ultimately give you the best
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outcome.
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NTIVA could be an attractive home or an interesting home for
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a prospective seller.
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It does come down to three key attributes.
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The first for us is we are Building a legacy defining
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brand.
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And it's defined by long term legacy presence in our
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community, building our business in the right way, where we are
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characterized by strong client and employee retention
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throughout our our existence.
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It also comes down to our core values of care, ownership,
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responsiveness, and excellence.
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But our underlying mission is that we exist to grow each
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other.
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Whether that's our people or our clients and technology just
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happens to be the accelerator as we do so.
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Yes, we are in technology.
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This is a technology business, but the people are at the core.
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And that is ultimately where we can hope to be successful or
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ultimately, if done poorly, and that's where our failure comes
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from.
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The second piece for us for winning an NTIVA is we want to
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be the most attractive choice.
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And what that means to us is we want to set what we sometimes
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refer to as the gold standard, being the best place, the most
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attractive home for talent, clients, vendors, investors,
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heck, even competitors or those who want to join join the story
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and sell into selling to our organization.
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And then the third piece is we want to create extraordinary
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financial results.
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And that's, that's better than ordinary results returns for
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everyone involved with NTIVA.
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It's not just our shareholders.
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It is all our stakeholders, whether it's our employees, our
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vendors individuals in the community, everyone that is,
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somehow tied into the ecosystem of NTIVA.
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We want to see Fantastic outcomes for those individuals.
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So that's really the three pieces of NTIVA that we define
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as winning.
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And if you as you're thinking about evaluating your business
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and you see some commonality around our mission and values to
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what you aspire and espouse within your organization, if the
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other elements that I touched on are exciting and intriguing
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opportunities for you, then you know, then perhaps NTIVA is the
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great place to come join forces.
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Carrie Richardson: Not everybody will be a suitable acquisition
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target for NTIVA.
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Let's talk a little bit about the basics.
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What are the"must haves" in order for NTIVA to even
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entertain having a conversation about potentially acquiring your
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MSP?
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Christopher Vollmand-Car: Before getting into those, I think an
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important question to ask as a seller is what it is that you
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would like to do through the course of this transition or
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transaction of your business.
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Do you know what you want to do after the transaction occurs?
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Whether that's within the business that has acquired you
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like NTIVA, or do you leave?
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Do you seek to transition out?
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Get onto your next adventure, sit poolside or on your boat?
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Just have that kind of clarity of goal in mind before you go
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into it.
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That can be really helpful because there are a tremendous
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number of options available to you from a buying opportunity.
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You really want to be able to hone in on those types of buyers
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that best fit your goals and expectations and aspirations
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through the transition of your business.
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Those who will see the most value in you and your
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organization becoming part of their larger business.
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So if you can hone in on that's That's incredibly helpful.
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I think the other thing to get back to your original question
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Carrie as I divert along here is what is the piece that's most
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interesting for us from an acquisition perspective?
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You're wanting to build a legacy together in the right way with
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the people first culture that's incredibly important.
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If you are aligned there, that's a Critical first step.
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Second for us is wanting a business that also serves the
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small and medium sized business community.
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Maybe it tails up a little bit into the mid market but that
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sort of alignment among the customer base and client base is
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incredibly important for us.
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Third area is around geographic.
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Presence and where you're located.
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We're fortunate enough to be in 10 markets currently throughout
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the U.
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S.
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predominantly in the Midwest in over into the East Coast.
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And so we're looking for businesses, not just in our
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existing markets to help grow and establish a majority
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presence, but also opportunities to expand into new geographies,
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new markets for us here in the U.
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S.
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So there is a bit of a divergence between what is
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required of those businesses, whether it's coming into an
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existing market for us or a new market.
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For us, the desire is really to be a million dollar plus EBITDA
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business if you're in one of our existing markets.
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And if you're moving into or are located in what would
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potentially be a new market for us, there's a higher threshold
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around 2 to 3 million in in EBITDA for those businesses, but
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that's, just a baseline financial criteria for us.
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We can go into a whole host of other attributes on the business
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around majority recurring revenue, 60 to 70 percent, plus
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high degrees of operational maturity.
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A very diversified client mix, meaning that there's not any
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substantial client concentration among your base, a strong
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employee retention, strong, 10 percent plus preferred organic
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growth, great leadership in place, constructive contract
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terms constructive pricing terms with your clients.
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The list can go on and on.
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And it's really about trying to find the appropriate mix of
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those attributes to put together what a picture or profile of a
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business would be.
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I think it's also worth mentioning that, from a
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geographic perspective, our existing markets, have recently
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doubled given the recently announced acquisition of The
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Purple Guys and so in addition to being, in.
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The D.
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C.
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Area, New York, Chicago as well as Colorado.
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We've now have expanded presence into Louisiana, a couple of
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markets in Texas, Kansas City area, Indiana, Missouri.
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So those areas now qualify as our in market locations.
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But we're looking to, expand not just in those areas, but also
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into new markets throughout the U.
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S.
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Those seem like the wish list, the checklist of things that
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NTIVA considers before they determine how they're going to
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value a potential acquisition.
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There has to be a minimum amount of EBITDA, depending on
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geography, and you're also going to look at distribution of
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clients, amount of recurring revenue compared to total
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revenue.
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Carrie Richardson: There was a long list there.
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They'll be in the show notes for anybody who's listening and
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wants to make that list.
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What are some of the things that would be red flags to you, even
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if the company had that, 1 million to 3 million in EBITDA,
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what are the things that would dissuade NTIVA from considering
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a potential acquisition?
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Christopher Vollmand-Cars: Yeah, I think the first run straight
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out the gate from a red flag perspective is a cultural
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misalignment between the two businesses.
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I know that can be hard to quantify in any formulaic way or
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spreadsheet type of way, but it's one of those things where
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you get a sense of the vibe of the leader.
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And do you think that individual and subsequently that
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organization could fit in well with how we go about our
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business on the day to day?
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And so that's an incredibly important first criteria.
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As an example, if I'm having a conversation for the first time
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with a CEO of an M.
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S.
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P.
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and that individual is talking about the importance of
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earnings, revenue, dollars into their pocket above, Absolutely
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everything else and seems to give short shrift to their
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clients or their employees and their growth and development
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opportunities.
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That's going to be a big red flag for me.
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And I won't even go down the route of trying to understand.
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The financial picture or the client picture of that business,
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because I know that that individual and likely also, that
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business is just not going to be the right fit for NTIVA.
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Carrie Richardson: So if a company is not quite at that,
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the magic number and they're interested in leaving the MSP
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space for whatever reason now, family, health, divorce, one of
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the many reasons that people end up having to sell before they
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are ready or want to, let's say they've got a 12 month window to
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start fixing things and they know that within 12 months,
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they're going to have to sell the company.
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What should they focus on 1st?
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Where can they actually make a big enough impact to move the
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needle enough to create a better valuation for exit?
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Christopher Vollmand-Carstens: I think 12 months, gives some
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period of time to make improvements on the business,
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but not in an expansive amount of time to make all the changes
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that you would like to make.
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It really boils down to where you can make that big impact.
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And I think as the question outlines that individual wants
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to transition out of the business.
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So I think it's about making sure that the business itself is
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ready and capable of carrying forward after that person
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leaves, so that you've got a strong leadership and management
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team in place that owns client relationships, that can handle
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escalation, that can continue to grow organically without the
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owner or the leader having to be in every little thing within the
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organization to keep things running.
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That ability to transition is a key facet of assessing a
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business during a potential transaction.
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So that would be one of the big things that I would focus in on.
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I think what's also important is being able to drive new client
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opportunities, new client growth.
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So I think that's an important thing to, to focus in on during
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that period of time.
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And the other thing that I would touch on, and I think they're
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related, is being able to hold on to and keep not just the
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clients that you've got on your roster, but also your employees,
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because if a business is experiencing high degrees of
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client churn or high degrees of employee attrition, those are
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going to be some red flags that may pop up during an evaluation
00:14:39
process, particularly if you're trying to make a clean exit from
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the business.
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You want to try to do some things where you could have more
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immediate impact and drive more near term results in the
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business.
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If you had a longer period of time, call it 24 months or even
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longer to think about from a transition perspective, continue
00:15:00
to work on these things that I just mentioned under the shorter
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time horizon, but then also work on things like improving the
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contract terms with which you have your agreements with
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clients.
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So there you've got favorable terms in place.
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You're also working on things like trying to improve pricing
00:15:16
or margin performance for your business over time, that does
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take a period of time to put into place before that can
00:15:23
really start to see returns.
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Then I would just continue to, reinforce that the transition is
00:15:30
the plan for you and for the business so that your team, your
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leaders, your rank and file employees are ready for that
00:15:38
sort of transition to take place.
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The last thing you want to have happen is for there to be a big
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surprise, which ultimately can lead to disruption, which could,
00:15:48
in worst cases, lead to departures from key staff.
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So keep people apprised of where your head is at.
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As a leader.
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I think that's important.
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You don't necessarily need to say, I'm in active dialogue with
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a prospective buyer immediately, but to let them know, and they
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should understand this to a reasonable degree, that you're
00:16:09
not going to be the leader forever and ever.
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Having that shift in mentality can help to future proof the
00:16:15
business so that you're getting to that successful outcome.
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Carrie Richardson: So you're preparing your team well in
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advance for the idea that one day you're not going to be at
00:16:24
the helm of the business.
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Christopher Vollmand-Cars: Yeah, that's correct.
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Carrie Richardson: We looked at a 12 month horizon, 24 month
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horizon.
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How long does a transaction normally take?
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Christopher Vollmand-Carsten: It depends on when you start the
00:16:37
clock Carrie, but from the very first conversation, getting to
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know an individual, a leader of a business, it can be upwards
00:16:46
actually of two to three years before we're ultimately closing
00:16:50
on the transaction.
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Now, during that early period of time, it's not about trying to
00:16:54
vet out every single number on the P and L or, assess the
00:16:59
precise terms within the contract.
00:17:01
It's more about trying to get to know that individual.
00:17:04
Establish rapport, trust and learn about that individual and
00:17:09
see if that individual and organization is gonna be the
00:17:12
right fit for the organization or fit for NTIVA.
00:17:15
At that early stage of time, the facets of the business may not
00:17:19
be quite the right fit for NTIVA and that there are things that
00:17:22
the company needs to work on, and that can take, a year or two
00:17:25
or three to work on to really put in place, whether it's, the
00:17:28
books and records are clean in the monthly closing.
00:17:30
The financials are super easy and efficient or any of the
00:17:33
things that we had just mentioned previously to get
00:17:36
those things in order.
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And as you're talking monthly or quarterly or seeing each other
00:17:40
at conferences.
00:17:41
You're building that relationship between the two
00:17:43
sides such that as that selling organization improves its
00:17:48
various metrics.
00:17:49
Obviously, you're you have the opportunity to push more dollars
00:17:52
to the bottom line as you're going month to month, but then
00:17:55
also put yourself in a more attractive position as a selling
00:17:58
entity.
00:17:58
And particularly in the eyes of a buyer like NTIVA.
00:18:01
So sometimes it can be upwards of that 2 to 3 year time horizon
00:18:06
from that very first conversation to a deal getting
00:18:08
done.
00:18:09
But once the conversation starts to get real serious about a
00:18:12
transaction, the pace starts to quicken significantly.
00:18:16
So it can be a matter of weeks.
00:18:19
Or, just a few quick months as you're starting to hammer out
00:18:22
more precise terms around a letter of intent.
00:18:25
And then, once that letter of intent is in place, we really
00:18:28
tried to undertake a transaction within, 60 to 90 days from that
00:18:33
point in time until close.
00:18:34
The pace may be slow to start and then it'll quicken as you
00:18:38
get towards the finish line.
00:18:39
But if you think about it from overall end to end it can be
00:18:42
that longer time horizon.
00:18:44
And it's really about just trying to ensure that this
00:18:48
business is the right fit for NTIVA.
00:18:51
Carrie Richardson: Are you giving them a honey do list or a
00:18:54
checklist of some kind saying hey, we're interested, we like
00:18:57
you, we would consider this, but you're not quite where we need
00:19:00
you to be.
00:19:01
Go work on these five things and let's talk again in six months."
00:19:06
Christopher Vollmand-Cars: Yeah, absolutely.
00:19:06
We've consolidated that into a bit of a, evaluation
00:19:09
consultation almost where we can take a look at where the
00:19:12
business is currently and look through a whole range of
00:19:15
attributes to see where they stand currently and where that
00:19:20
valuation could look like for the business at present.
00:19:23
And in many cases, You know that does not meet the goals or
00:19:28
aspirations of that seller.
00:19:29
And then it's about working on the plan to figure out how do
00:19:33
you get from point A to point B, where you're not just a more
00:19:37
profitable organization, but also more attractive
00:19:39
organization and one that could very likely also receive, higher
00:19:44
multiple on the performance of the business.
00:19:47
Carrie Richardson: Let's talk about those higher multiples.
00:19:49
What are the things that would encourage NTIVA to offer a
00:19:53
higher than average multiple to a company?
00:19:57
Christopher Vollmand-Cars: Yeah.
00:19:58
Size is a key contributing factor.
00:20:01
Once you get above 500 K or 1, 000, 000 in EBITDA or two or
00:20:05
five or 10 typically you're seeing in the market, those
00:20:08
multiples do go up.
00:20:09
The operational maturity of the business, the leadership
00:20:13
presence and management capability of the business is
00:20:16
tremendously important.
00:20:18
I think the other thing that's worth mentioning, it's become
00:20:21
particularly prevalent over the last year or two is a
00:20:26
demonstration of skill or expertise within an industry
00:20:30
vertical, a specialization, whether it's health care or
00:20:34
finance or nonprofits or government contractors or
00:20:39
something that can Demonstrate that you've got a differentiated
00:20:44
skill set when it comes to a particular industry, vertical or
00:20:48
verticals.
00:20:48
I think it's what's become common is that clients are
00:20:52
demanding more and more from their providers.
00:20:55
And they don't want to just be speaking with, Joe on the team
00:20:59
who happens to be a bit of a generalist and can talk about
00:21:02
and help sort out business challenges, regardless of
00:21:06
industry.
00:21:07
What we're interested in is.
00:21:09
And what those clients are looking for is if they want to
00:21:12
speak to Mike, but Mike has got a highly attuned skill set in
00:21:19
order to help and solve challenges for regulated
00:21:23
financial companies.
00:21:24
And so that becomes a much more worthwhile engagement for that
00:21:28
client and much more willing to, spend the dollars required to,
00:21:32
continue to receive the managed services, but then also know
00:21:35
that when issues do arise that.
00:21:38
In this example, Mike is very attuned to the needs and
00:21:42
particulars of the finance industry.
00:21:45
In this example, it can help solve those questions and solve
00:21:48
those issues much more rapidly than, Joe in the earlier example
00:21:53
Stronger need for clients to want that improved expertise.
00:21:58
And so if you've got that as a demonstrated capability in one
00:22:02
or two or a handful of industry verticals, that can be seen in
00:22:05
the plus category for for a prospective MSP looking to sell.
00:22:10
Carrie Richardson: I know we're beating this one to death, but
00:22:12
let's define what operational maturity means for a managed
00:22:17
services business owner.
00:22:18
Not everyone knows the parameters.
00:22:21
Christopher Vollmand-Carsten: It can cover a variety of different
00:22:23
attributes, but I put it to down to You've got a clear
00:22:29
organization and managerial structure in the business with
00:22:34
reporting lines established, clear goals and expectations and
00:22:37
responsibilities for the individuals within the
00:22:40
organization within their roles.
00:22:42
You've also got clear and repeatable reporting that
00:22:47
happens on the monthly basis.
00:22:49
From financial P and L perspective, but then also more
00:22:52
frequent KPIs and other measurement attributes with
00:22:56
respect to service desk performance or project delivery
00:22:59
capabilities or other attributes of the business that you're
00:23:03
looking to measure performance on.
00:23:07
I think it's all also about establishing capabilities for an
00:23:11
opportunities for growth and development of the staff and
00:23:14
team within the organization.
00:23:17
And also, frankly, just an acknowledgement that the owner
00:23:21
of the business is not someone that needs to step into 15
00:23:26
different things within the organization to get things to
00:23:29
resolution, that there is a highly capable leadership team
00:23:33
or management Individuals in place that can solve things
00:23:38
without the owner having to be in the weeds within the
00:23:41
organization.
00:23:43
Carrie Richardson: How much is having a independently operating
00:23:46
sales organization valued when you're looking at an
00:23:51
acquisition?
00:23:52
Christopher Vollma: Tremendously important and valuable.
00:23:55
If you've got an organic sales engine in place that's
00:23:59
tremendously attractive because if you've got that demonstrated
00:24:02
growth on your own and it's not beholden to a single individual
00:24:07
or a single owner, it gives you just a great deal more
00:24:12
flexibility in what you'd like to do with the organization when
00:24:15
it does transition.
00:24:16
I think providing yourself with more options is really what
00:24:20
you're trying to strive towards.
00:24:22
Carrie Richardson: One of the things that we've been seeing a
00:24:24
lot of is an MSP will have one great year.
00:24:28
They made 35 points in EBITDA and now they're going to sell.
00:24:33
But that's the only year that they've ever managed to move the
00:24:35
needle that much.
00:24:36
Will that 1 outlier year help them enough to move that
00:24:42
valuation up?
00:24:44
Christopher Vollmand-Carst: From our perspective, we're looking
00:24:46
across multiple years of performance of the business, the
00:24:48
last three years or so preferably to really understand
00:24:52
the trends within the organization.
00:24:54
Look, it's certainly the case where you'd have a very strong
00:24:58
year in your most recent year.
00:24:59
Maybe you had a.
00:25:01
A large client that just started or a big project that got done
00:25:05
or a big hardware software order that got done to help favorable
00:25:09
pricing that help skew positively the performance of
00:25:13
the business.
00:25:14
By the same token, you could have a material client
00:25:17
departing.
00:25:18
They could have an adverse impact on the business.
00:25:21
We're trying to understand kind of the overall picture or story
00:25:24
of the organization and don't look exclusively at just the
00:25:27
last year to say, ah, just because you did the last 12
00:25:30
months, it was a standout year.
00:25:32
Now we're going to apply a very attractive multiple to the
00:25:37
business just on the basis of that.
00:25:39
Because.
00:25:40
When we're acquiring a business, the hope or expectation is that
00:25:43
the positive performance that we've seen in the past will be
00:25:46
that which can continue in the go forward.
00:25:48
And if it's just a one time event, how certain are we that's
00:25:52
actually going to be the case?
00:25:54
Particularly as we learn more about the circumstances of that
00:25:57
one off year of significant benefit, how sustainable could
00:26:01
that be?
00:26:01
Or would that not be?
00:26:03
So that's gonna factor into the story as well.
00:26:06
Carrie Richardson: What's good growth look like year over year?
00:26:09
What are you looking for?
00:26:10
Christopher Vollmand-Carstens: I think a good benchmark for
00:26:12
growth organically is 10 plus percent organic growth for the
00:26:18
business.
00:26:19
That's a combination of new logos, new clients coming in the
00:26:23
door as well as continuing to expand the capabilities
00:26:27
offerings spend from your existing clients.
00:26:30
I think that's really where you're going to see material
00:26:33
value generated for your business.
00:26:35
If you can keep it at that level while at the same time ensuring
00:26:38
that you've got very limited attrition for your existing
00:26:42
client base, that is also tremendously important It could
00:26:45
be a business where you're say you're growing 20 percent
00:26:48
organically with new logo coming on board every week or every
00:26:52
month.
00:26:52
But by the same token, you've got Clients that are, leaving
00:26:55
off the back and leaving you.
00:26:58
That's not a great story to to sell off of you want to bring in
00:27:02
new clients while lose while losing the minimum number of
00:27:05
clients.
00:27:05
Carrie Richardson: So you're not looking for a a boat with a hole
00:27:08
in the bottom of it.
00:27:10
Christopher Vollmand-Car: That's correct.
00:27:10
Yeah, that's exactly right.
00:27:12
Carrie Richardson: So what do you see as a buyer when somebody
00:27:14
comes to you with extraordinary margins, above average?
00:27:19
What are your first thoughts when you're looking at that?
00:27:23
Christopher Vollmand-Cars: Yeah, I'm thinking about, margins.
00:27:24
I guess I'll particularly think around, EBITDA or earning margin
00:27:28
if that's at an excessively high level.
00:27:31
I'll go back to thinking about industry benchmarking that's out
00:27:34
there from service leadership or others in the industry that talk
00:27:38
about, You know that around 20 percent EBITDA margin as being
00:27:44
close to that best in class top quartile performance of a
00:27:48
business, particularly as you start to scale and grow in
00:27:52
organization.
00:27:53
And so if I see very high EBITDA margins, 35%, 40%.
00:27:58
Something along those lines.
00:28:00
It starts to ask questions around what is driving that high
00:28:04
degree of profitability.
00:28:06
Is there sufficient labor and individuals within the
00:28:09
organization to really serve the needs of the business now, but
00:28:12
also, into the go forward?
00:28:14
Are those individuals being paid appropriately for the work
00:28:17
that's being done.
00:28:19
Are there any sweetheart deals with clients that are allowing
00:28:22
for very aggressive pricing to be put in place?
00:28:27
Frankly, there may be, very acceptable answers to all of
00:28:31
these questions to allow a very high performance of the
00:28:34
business.
00:28:35
But until I've got an understanding of what those
00:28:38
reasons and justifications may be.
00:28:41
I'm going to lean in on some of my questions to really round out
00:28:45
the story just in light of, what I understand to be best in class
00:28:49
performance for a business that is ready, not just for the now,
00:28:51
but also for the, the go forward success of the organization.
00:28:55
Carrie Richardson: Let's say they had three years of 40
00:28:58
percent EBITDA.
00:28:59
Margins that they were able to hold their growth trajectory is
00:29:02
all right Are you going to value them at that 40 percent or do
00:29:05
you value them at the amount that you're going to be able to
00:29:09
support that business at?
00:29:11
Christopher Vollmand-Carst: It's probably going to be somewhere
00:29:13
in the middle, but probably closer down towards that call it
00:29:17
20 percent normalized level because in analyzing the
00:29:22
business i'm going to likely see areas in which Investment may be
00:29:26
needed, whether it's account management or V.
00:29:28
C.
00:29:28
I.
00:29:28
O.
00:29:29
or other capabilities that will be needed in order to sustain
00:29:34
that performance within the NTIVA model.
00:29:38
NTIVA Doesn't need to be the only home for an organization as
00:29:43
much as it pains me to say that.
00:29:45
I think the great thing about the MSP industry is that there
00:29:50
are a variety of different paths that you can take when you seek
00:29:53
to transition your business and ultimately it's about finding
00:29:56
that right home for you.
00:29:57
Maybe you want to run it still somewhat independently after a
00:30:02
transition by affording you the chance to take some chips off
00:30:05
the table, or you do want to fully integrate.
00:30:07
Or there are other characteristics that are
00:30:10
important to you, or there's cultural alignment, or there's
00:30:13
cultural alignment that isn't there.
00:30:16
All these sorts of things come into play to allow a seller to
00:30:20
find hopefully the right buyer for them.
00:30:23
I think that's a great attribute to our industry that may not
00:30:27
exist in others where you've got that flexibility to be able to
00:30:32
take advantage of that.
00:30:33
So there is not just one single path that you have to take when
00:30:38
you're looking to transition the company.
00:30:41
Carrie Richardson: What I heard today is it can take up to 3
00:30:43
years for a transaction to happen, especially if you aren't
00:30:47
quite where you need to be.
00:30:49
There are some things that you can work on in a 3 year period
00:30:51
that will take you from where you are now and potentially a
00:30:56
valuation that, Would not be acceptable for you or for the
00:31:01
generational wealth that you're hoping to create for your
00:31:03
family.
00:31:04
You can invest three years of hard work in some very specific
00:31:07
things And ideally have the valuation that you want at the
00:31:11
end.
00:31:12
Christopher Vollmand-Car: that's exactly right And I think what's
00:31:14
also, worth mentioning is that in order to know Where you're at
00:31:19
currently it's helpful to talk with someone who is in the
00:31:22
market evaluating Companies day in and day out to Help you
00:31:26
prioritize those things that can help to drive the needle change,
00:31:31
change the valuation outlook on the business in that timeframe.
00:31:35
You've got a finite amount of time in, in your day to be able
00:31:38
to focus in on things.
00:31:39
And so you really want to spend that time on that, which is
00:31:42
going to drive the most positive impact for yourself.
00:31:45
And then, it's the personal element, the people element to
00:31:48
this business, being able to evaluate that as well.
00:31:51
And I think that is not something that happens
00:31:53
overnight.
00:31:54
This is not a shotgun Hollywood wedding.
00:31:56
This is something that should take time to establish and
00:31:59
develop.
00:32:00
And that's ultimately where you're going to be able to find
00:32:02
the highest likelihood of long term success as you come
00:32:06
together.
00:32:07
If you've vetted out all those sorts of things, you've gone
00:32:09
through the quote dating process.
00:32:12
for a little while before you ultimately get engaged at the
00:32:15
LOI and then get married when the deal gets done.
00:32:18
Carrie Richardson: What else can you leave the listeners with
00:32:21
today, Chris?
00:32:22
What are you seeing in the market?
00:32:24
What are interesting trends?
00:32:25
What are the next five years going to look like in the M& A
00:32:28
space for us?
00:32:29
Christopher Vollmand-Carstens: I don't know if I can be a
00:32:30
prognosticator for the next five years.
00:32:32
But what I can say, and I don't think this would be shocking to
00:32:36
say, is that the level of attention and interest that is
00:32:41
out there within within M& A in our MSP industry is probably at
00:32:47
its highest level that I have seen.
00:32:49
And so I would encourage listeners to take advantage of
00:32:52
every opportunity they can to get themselves smart, smarter,
00:32:57
educated on how M& A and how to smartly manage it for your
00:33:03
business.
00:33:04
If you can take advantage of those opportunities, I think
00:33:06
that's where you put yourself at a better position because it
00:33:09
gives you insights to know what is working or what it may not be
00:33:14
working within your organization.
00:33:15
So you can work to improve the business appropriately.
00:33:18
But then also when it comes time to transition your business,
00:33:21
you're just that much more confident in the decision making
00:33:26
that you're ultimately undertaking.
00:33:27
Whether this education effort comes through, attending
00:33:31
conferences or listening to webinars or seminars, or,
00:33:33
relying on peer groups or, other, stakeholders and advisors
00:33:39
for yourself, lean into others within the industry who may have
00:33:43
a piece of information or knowledge that that you don't
00:33:45
have at the current time.
00:33:47
I think that's one of the great things about our industry that
00:33:50
there is a level of collaboration that can be very
00:33:55
constructive So take advantage of it.
00:33:57
Folks are happy to talk about it, share, help you learn just
00:34:01
as much as they seek to learn.
00:34:03
And so I think if you want to put yourself in the best
00:34:05
positions, get yourself out there to go ahead and learn
00:34:09
something new.
00:34:09
Carrie Richardson: I think that's about all the questions I
00:34:11
have for you today, Chris.
00:34:13
Thanks for joining us.
00:34:15
Christopher Vollman: Absolutely.
00:34:15
Thank you for having me, Carrie.
00:34:17
Carrie Richardson: Thanks very much.
00:34:17
Thanks for being on WIN!
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