Presidio COO Talks IPO Aftermath, M&A Strategy Ahead And 'Juggernaut' Cisco

Presidio COO: IPO Is 'Just The First Step'

Solution provider powerhouse Presidio became a publicly traded company on Friday, with the company's shares slightly rising throughout the day.

"For Presidio, it's a great day," said David Hart, COO of Presidio, in an interview with CRN. "But it's just the first step."

The New York-based solution provider, ranked No. 22 on CRN's 2016 Solution Provider 500 list, priced 16.7 million shares at $14 and raised $233 million by investors, which it will spend on paying down the company's $1 billion debt.

Hart talks to CRN about the company's IPO price range, its OEM relationships and the importance of Presidio's scale in today's complex IT environment.

How does it feel to go public and what does this mean for Presidio and your customers?

For Presidio, it's a great day. This is a great milestone for the business. We're very gratified we were about to get through this process, we talked to a lot of very serious investors -- many of whom have opted to put some of their money in Presidio -- but it's just the first step. It's another step in the journey. We started 14 years ago with professional investors, we've progressed through the venture capital scene, through the private equity scene – now this is the next step for us.

Talk about Presidio's opening share price. Why it was on the low end of your $14 to $16 estimated range?

I don't think there's anything magical about $14 – it's what the market feels what is a valuable price for this company. We're more invested in creating value for our customers and the value of Presidio will take care of itself.

Presidio IPO raised $233 million in cash. Where are you going to spend that?

One hundred percent of the cash is going to be used to retire debt, so just strengthening the balance sheet.

Can you elaborate more on your strategy to combat Presidio's $1 billion debt?

Part of the capitalization strategy of the business was to do this equity offering in the public market and to use the proceeds to pay down debt and that will strengthen the business. We'll be able to continue to do business on improving financial terms. This is right down the middle of the road for how a private equity-owned business will continue to transition into the public market.

Cisco makes up a large portion of your purchases. Is Cisco going to still be that No. 1 vendor for you now as a public company?

I don't think we look at Cisco or any of the 500-plus OEMs that we do business with any differently now that we’re public. We're on the same course. We want to partner with the best innovators out there that are creating the best technology out there.

Do you see that reliance on Cisco lessening or strengthening as you make a bigger push into cloud and security?

Certainly Cisco has done an unprecedented job in innovation and bringing new solutions to market. They've been a juggernaut at that. You really can't point at anybody in the IT infrastructure space who's done it as long as they have, at the scale and velocity that they have. So you shouldn't be surprised that Presidio has a big relationship with them. They're innovating at the fastest [rate] with the best scale – that's our raw material. But there's over 500 different partners that we do business with and we welcome all.

Does being a public company provide any benefits for your customers?

In the long term, it strengthens what was already a pretty strong balance sheet. It gives us some capital to continue to invest in growing the business. We've gone through acquisitions and we now have another currency to help us grow through acquisitions, but we're focused on continuing to grow organically, which is where most of our growth comes from. We'll invest in our people and we'll be able to invest in our clients and create value for them.

How is Presidio's M&amp:A strategy going to change?

Our acquisition strategy is essentially the same today as it was pre-IPO. It's the same as it was a year or two ago. There are still geographies that we could be denser in, particularly in the Mountain States, in the Midwest, the West Coast – so we'll continue to look at geographical extension opportunities. But we'll also look at next-generation services companies that are adjacent to this digital infrastructure, digital transformation, cloud and security world that we're living in … the smaller capabilities companies are also very interesting acquisition candidates for us.

Can you talk about the business climate your entering the public market and if you think President Trump's focus on business is benefiting Presidio?

Trump's been in office what, 100 days? It's hard for me to say what's going to go on there. What I do know is -- this is part of the research we did with Gartner and others -- that the North American IT market is a $1.3 trillion-dollar market in 2020. That sounds like a big enough market for us to go play in and be successful for our employees, our customers and our investors.

Where do you see Presidio's greatest margin pressure in the market?

It's always been a competitive market. For Presidio, where we're going to see margin pressure are in opportunities where there is really no value-add -- it's just a customer that wants some fulfillment. And that's not really our game, we're a services-led organization. As long as there's a substantial services component in the relationship, which is very typical for us, the margin pressure is not the number one factor. The number one factor is, can you provide some insight, some value in the services that differentiates you and helps that customer solve a problem.

Can you talk about the importance of scale and size in the market for Presidio?

It matters a lot for a few different reasons … We've always known that this is a business that was going to increase in complexity and therefore customers will need the help of a valued-based services organization like a Presidio. That was the thesis on which Presidio was founded in 2014.

But I could never imagine the rate of change accelerating at the pace that it has, and for a solution provider like Presidio, that means constant investing in what's next. Our customers rely on us to be the experts and to help them navigate these very choppy waters. So having scale allows you to invest and invest in multiple different areas. So you saw the emergence of cloud, so being able to make that transition to help our customers, we were able to make the acquisition of Sequoia. We're able to invest in this very high-end consulting asset and leverage that across our entire 2,800 employee organization – not only to raise our level of expertise but to help us raise our customer's level of expertise. Without scale, it's difficult to make those investments.

What’s another way Presidio is benefiting from your size and scale?

Another thing you see a lot of in industries are consolidating, and not just IT. As our customers get bigger, they're demanding more coverage both nationally and internationally. With our scale, we're able to invest in our global services program where we can now assist our U.S. multinational customers around the globe and we do significant business in that area now.

Where are you seeing the fastest growth area in managed services?

Certainly cloud and security are fast growers for us. Digital infrastructure is good, steady growth. We're going to focus on those three areas. Those are the areas our customers are telling us that they need the most help in and where we can add the most value for them.

What's your message to the market and your customers with Presidio's IPO today?

We're a leader in cloud security and digital infrastructure, we're going to continue down this path. There's no strategy change with this event. We continue to believe we can create a lot of value for our customers with the services and solutions we provide … Today is a great milestone but it's another step in the journey and we're going to stay focused on our customers.