CDI CEO On Shooting For $2B In Sales And Why The Firm Is ‘Primed’ For M&A
‘Based on a year of operational upgrades, almost every tool in the business has either been modernized, upgraded or replaced in 2022, we are fired up and excited to expand this business continually through the nation and onwards of $2 billion,’ says CDI CEO Rich Falcone. ‘[There’s been] a lot of operational optimization in 2022 to prepare us for significant organic and inorganic growth in 2023 and beyond.’
Computer Design & Integration’s Rich Falcone is “fired up and excited” about the company’s merger and acquisition strategy this year and is ready to take on larger acquisitions to grow the company, known as CDI, to $2 billion in revenue.
The New York-based solution provider, No. 47 on CRN’s 2022 Solution Provider 500 list, spent the last year optimizing the business by design.
“When we ask our clients, ‘Is your job harder than it was a day ago, a year ago, five years ago, 10 years ago?’ They 100 percent say yes,” said Falcone, CDI LLC’s CEO and president. “There’s a linear relationship between time and the challenges of running IT operations. No one’s denying that. What that’s created in our industry is what I like to refer to as the relevance curve. I think that undeniably every day CDI and our competition become more or less relevant to our customers, every day, every year, every five years, every 10 years, but at a more rapid pace than in the past.”
Falcone believes M&A has been CDI’s solution to the relevance curve.
“I think that by uniting the service catalogs, the sales forces and the engineering pools of seven great companies, we have undeniably become more relevant to our customers in a time of change where IT operations has simply gotten harder,” he said.
And it’s no longer about saying, “We sell outcomes,“ he said.
“Everybody sells outcomes,” he said. “That’s obvious in 2023. I think the question is how you implement those outcomes.”
M&A has also expanded CDI employees’ career choices as well as expanded their networks and leadership opportunities.
“It’s fun to get a bunch of new people, have some new challenges and take on new adventures together,” he said.
The company has more than 1,000 customers and an estimated $900 million in revenue, according to Falcone.
CDI acquired Plan B Technologies and P5 Solutions in 2020; High Availability, Kintyre Solutions, Candoris and SecOps Partners in 2021 and Clearpath Solutions in 2022. The company also established CDI Europe in July 2021 and will be launching CDI India very soon.
With a broader market and a wider reach, CDI is ripe for M&A. Check out what Falcone had to say about CDI’s M&A strategy and what to expect from the company this year.
When we spoke in 2022, you said CDI buys companies to expand its geographical footprint and technical capabilities, but also the culture has to fit. Does that still ring true? Is there anything else you look for?
No, I would not change that formula. It’s worked for us and I think it’s worked through all three lenses. Our clients, our partners and our employees have all reacted positively to the mergers and acquisitions, so we would not change that formula at all.
CDI hasn’t had an acquisition since January 2022. You said the company has been focusing on strategy and optimization, can you double down on that?
We purposely focused on optimization at kick-off last year. Around this time last year our big message was we were going to focus and scale this business after all these acquisitions. To be specific about that, in 2019 we had around 170 employees in seven states. I think now it’s 38 states and roughly 650 employees. That was a phenomenal opportunity for us to grow, but we needed to update and modernize our back office and our systems, and we did that.
We have brought this business to a place where it now is in position to scale from an operational perspective and a tools perspective to a national business and to a $2 billion revenue mark. A year ago we were not ready to take on that scale. Based on a year of operational upgrades, almost every tool in the business has either been modernized, upgraded or replaced in 2022, we are fired up and excited to expand this business continually through the nation and onwards of $2 billion. [There’s been] a lot of operational optimization in 2022 to prepare us for significant organic and inorganic growth in 2023 and beyond.
So what is your M&A strategy for 2023?
It’s time to be aggressive again. We came out of the gates with our phenomenal partner, One Equity Partners, and we made a bunch of great decisions in a short amount of time. We integrated them, we optimize them, we slowed down and we focused on those integrations. I’m beyond proud to say this company is one integrated company. We have one commission plan and we have one workflow for every role in this business. No matter where you work at CDI, you perform your job with the same tools and the same workflows in the same systems with one unified org chart. That’s not easy to do. And I can confidently say this is one integrated organization that is now primed and ready for larger scale mergers and acquisitions.
Does a possible recession play into your M&A strategy?
No. I’ve been here almost a quarter century and I’ve successfully, with amazing leadership, managed through prior recessions. CDI has always come out on the other side of recessions stronger. In my humble opinion, weak companies make bad decisions that affect great people during recessions. We do not do that and often look to take advantage of it. We’ve often strengthened our team organically and brought on some of our best leadership during recessions. Obviously a recession affects economic realities, like debt financing and if people are even willing to merge and acquire, but from a CDI perspective I don’t let macro-economic factors that we can’t control affect our decision making. We should be running a diligent efficient, fun, effective and passionate business whether we have a recession or not.
The last seven acquisitions you had were in a tighter timeframe. If you go on another acquisition spree over the next 18 months, is it going to be in a tighter timeframe? If so, why is that?
Although we did take time off purposely to optimize, going forward now that that optimization is complete and those systems are upgraded, it’s going to be all about what it was about from the beginning, which is the right culture. I think larger scale M&A make senses for CDI at this point. We’re coming up on a billion dollars of revenue. We’ve had phenomenal revenue synergies. Our customers and the customers of the companies we’ve acquired are working with us on more projects and driving more outcomes than they were before we united. The thesis has been proven that if you take great people with great cultures, and you go back to the same customers that they’ve known for 10 to 20 years, and you simply provide them a wider service catalog with wider capabilities, a greater engineering pool and a larger force multiplier of scale...those customers are going to be served in a way that is more optimized and [have a] wider value proposition than before that unification.
The project has been successful, and it’s time to kick it into third gear [with] larger scale M&A and also Western in our geographic footprint. In terms of 2023 and the things we’re betting on is our core sales force will continue to build the foundation of our customers modern applications and modern infrastructure. But we are going to triple down on our specialty sales forces which is our digital sales forces that focus primarily on ServiceNow, Salesforce and DevSecOps, and our security sales force, which focuses on a lot of things but some of the hot topics are the SASE evolution, advanced penetration testing and tabletop exercises. The companies that we’ve acquired did not have managed service sales forces, security sales forces and digital sales forces, or even offerings in those three spaces. We’ve seen hundreds of millions of dollars of revenue synergies by simply unleashing those three sales forces into the acquired companies traditional core data center sales forces. [That’s why] I think our model is different.
What is your primary focus this year?
Our core sales force will continue to drive modern applications on modern infrastructure, but our bets are digital, specifically ServiceNow, Salesforce and DevSecOps with our digital sales force; security, specifically the SASE revolution, penetration testing and overall security hygiene with our security sales force; and our managed service offerings with our managed service sales force. With that said, we do feel we are going to see, and are seeing, exponential revenue and value with our Microsoft offerings. We have really amped up our game in many things Microsoft. We’re even considering a Microsoft specialist sales force because of the demand. I think our specialty sales forces are budgeted to drive, and will drive, over a third of our revenue this year.
What is your biggest challenge right now?
It’s the same as it was last year, and the year before, and the year before and it’s the same as it’ll be next year. It’ll never change. As leadership we have one job, and that’s to recruit and retain not just top talent but good human beings. I think top talent can be overrated. I think college degrees can be overrated. We’ve dropped our college degree requirement and we’ll welcome anyone who’s a good human. We’ve done our best to recruit from different areas, like former veterans who are looking for a chance to re-enter the workforce.
You can teach tech, you can’t teach ethics, responsibility and discipline. That is always what keeps me up at night. Never take the team for granted, provide a bright future and good career path and then your challenges become fun adventures as a team.
Can you tease any mergers and acquisitions you're doing this year?
We’re in conversations with a couple of great companies right now. I would love to conclude those talks with a partnership, that’s our goal, but the time is everything. Understandably, a lot of these companies are founder led. It’s someone’s business they’ve been running for 20 years, so there’s a lot of a pride and emotion. I always tell a founder or CEO who may be looking to partner with CDI that it has to be on their timeline, not ours. If it’s on our timeline, the integration is not going to go well. We can’t force those timelines. We need to be patient and be diligent, and when the timing is right it’s right. Hopefully it’s right sooner than later, but I’ll never force M&A.
Is there a certain number, in terms of acquisitions, you would like to hit this year?
Not a number of them, but I think it’s time for CDI to start to march westward and continue our dominance of the East Coast.