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Let's Make A Deal
I.T. Pros survived a turbulent 2009, but the ordeal left Ford wondering about the long-term prospects for his company. He had wanted to build I.T. Pros into a national managed services powerhouse, but the prospect of doing so seemed increasingly daunting. With venture capital investments out of the question, Ford had two options: secure more loans -- and take on more debt -- or merge with another company.
Even if Ford could get additional funding from banks, the price was just too steep. "I'm a fairly young guy. I'm in my late 30s," Ford said. "All of the capital commitments for I.T. Pros were guaranteed by me personally, and I was assuming a lot of risk."
By the end of 2009, Ford had received a call from All Covered. He hadn't made the decision to begin shopping I.T. Pros and was surprised to find that All Covered, an occasional competitor, was interested in buying his company. "We knew about All Covered and had competed with them a few times," he said. "When we found out we were on the short list, it was really an honor."
For the next few weeks, Ford and All Covered had additional discussions about coming together and realized they shared a common vision for SMB-tailored managed services. And All Covered wasn't the only potential suitor. "We talked with other companies to see what the valuations were for I.T. Pros," he said. "But it wasn't just about valuations. It was about finding the right culture, strategy and vision, and All Covered had all that. It was a good company to hand my baby off to. Everything that All Covered said it would do, it did."
For All Covered, I.T. Pros was exactly the kind of company it wanted to add -- a growing solution provider with strong customer ties and a highly respected network operations center for managed services offerings. "VARs are essentially break-even businesses with a lot of debt, and most have no real prospect of growing to the point where the return justifies going forward and assuming more personal financial risk," Croteau said. "But most of the companies we've acquired or looked at didn't have the kind of growth and expertise that Doug's company had."
By April, the paperwork was finished, and the two companies announced the deal in May. While the details of the acquisition remain confidential, both All Covered and I.T. Pros seem extremely happy. Virtually all of I.T. Pros' staff joined All Covered, and Ford himself became a director of consulting services at the company. "The deal was done in about 60 days, but it took a while for it to sink in," Ford said. "The decision to sell I.T. Pros was not taken lightly."
Croteau recognized how hard it was for Ford; having sold his own business to All Covered years earlier, he was familiar with what Ford was feeling. "It was a difficult decision for Doug because the company was nearly 10 years of his life and all the blood, sweat and tears that went into it," Croteau said.
For his part, Ford feels that while he could have kept I.T. Pros independent, the company would be stuck in neutral instead of on the fast track. And Ford didn't want to be stuck in that lifestyle VAR mode struggling with a break-even business like so many others. "I would not want to be starting a managed services business right now, because those companies are going to have a tough time in this economy," Ford said. "But for the companies that are already doing managed services, I think they have a great opportunity."
While both Ford and Croteau feel the economy is recovering, especially at the small-business level, they anticipate that IT spending and industry growth will be challenged for the foreseeable future. And that likely means even more owners looking to sell their solution provider businesses.