Best Buy has reached a deal to acquire mindShift Technologies for $167 million, according to the companies.
Best Buy plans to utilize mindShift's managed services capabilities to fuel growth into its own SMB services business, according to the Minneapolis-based retailer.
"The combination of mindSHIFT's capabilities and Best Buy's points of distribution through its retail, Geek Squad services and Best Buy For Business operations is expected to create a competitive advantage that would provide an opportunity for the two companies to capture greater share within the estimated $40 billion small and mid-sized business MSP market," wrote Best Buy in a statement announcing the release.
Waltham, Mass.-based mindShift is no stranger to acquisitions itself. The company made eight acquisitions from 2008 through early 2011 to become a $100 million MSP and claimed to be the largest MSP in the U.S. covering the SMB market.
In an interview with CRN this June, mindShift CEO Paul Chisholm said he expected consolidation in the MSP market and added, "you need more scale to drive better revenue." The company should have that opportunity now with Best Buy's broad SMB customer base.
Best Buy likened its acquisition of mindShift to its 2002 purchase of GeekSquad in terms of driving growth in its services business.
Best Buy plans to help mindShift expand its vertical-market capabilities in legal, healthcare, financial, non-profits, associations and education markets.
Best Buy plans to give mindShift the "freedom and resources to grow" under its current name and management team, according to the company's statement. The newly acquired company currently has 500 employees with offices in Massachusetts, Long Island, Minneapolis, Morrisville, N.C., Philadelphia and Washington, D.C.
"Fundamentally, we believe we can grow faster with someone like Best Buy than we could do our own and vice versa with them. They felt we had the knowledge of the SMB space and the services that customers want," said Paul Chisholm in an interview Monday with CRN.
While specific details haven't been worked out, it's unlikely that mindShift will have much brand visibility within Best Buy stores. More likely, Best Buy will forward services leads to mindShift that the MSP could not have gotten on its own, Chisholm said.
"The lead generation capability they bring is enormous. They have customers that come into their stores and say ' We like X.' They might provide those services, they might not. We can do a full package to customers. I've always said that small business likes to do business with one stop shop for htem."
MindShift's expertise in the fast-growing cloud space was also a lucrative selling point to Best Buy, Chisholm said. "That's where the world is going and they see us as knowledgeable in that in the SMB space," he said.
Next: The Difference Between A VAR And An MSP
Earlier this year, Chisholm told CRN that he wanted to differentiate mindShift in the public's eye as a service provider and not as a VAR because an MSP was a more valuable company description. At the time, mindShift had started to look for additional investors to fuel its growth.
"Best Buy in and of themselves can push a lot of hardware. They liked mindShift because we are a service provider. That's what they want, to develop more service capabilities," Chisholm said. "We had multiple companies interested in us and interested in what we were doing."
By the end of August, it became clear that Best Buy was the right fit for mindShift, Chisholm said. "We didn't look for a retailer per se, but rather an investor. We talked to many different types of companies but we felt Best Buy was the right choice," he said.
Meanwhile, Best Buy also announced it is buying out Carphone Warehouse in its mobile communications business in the United States for $1.3 billion.
Brian Dunn, CEO of Best Buy, said in a conference call that the pace of growth in communications and services in his first 40 months in the market was not where he wanted and that the acquisitions would help the company get there.
"We're taking Best Buy to where the growth is and where cusotmers need us to be. We're leading our company toward a vision of a connected world," Dunn said in a conference call with analysts. "The mindShift acquisition gives us an established presence in the SMB business, a growing and lucrative market."
Best Buy shares were trading at $26.40 Monday afternoon, down 91 cents or 3.3 percent per share. Best Buy expects the mindShift acquisition to close by the end of the year.