Logicalis Buys MCPc Unit In $42 Million High Premium Blockbuster Deal

Solution provider behemoth Logicalis Wednesday said it will pay up to $42 million in a high premium acquisition of the $133 million advanced technology integration group (ATIG) of Midwest data center/networking solution provider superstar MCPc.

The $42 million price tag is more than double the $18.5 million price that Datalink, No. 43 on the 2015 CRN Solution Provider 500, paid for Bear Data, a similar-size Cisco Systems solution provider, just nine months ago.

On its face, the deal also represents a significant premium above the $15 million in up-front cash that PCM, No. 29 on the 2015 CRN Solution Provider 500, paid for En Pointe, a $393 million business just four months ago. The total value of the En Pointe deal remains unclear because the earn-outs were not disclosed.

[Related: 2015 Solution Provider 500]

Sponsored post

"Logicalis gets a high-performing group of engineers and salespeople focused on the enterprise market without all of the costs associated with a typical acquisition, and MCPc gets a rich premium based on how the deal was structured," said a source close to MCPc, No.72 on the 2015 CRN Solution Provider 500.

The source said that New York-based Logicalis, a $1.5 billion global provider that is No. 27 on the 2015 CRN Solution Provider 500, is acquiring a technology business with best-in-class Cisco customer satisfaction scores powered by an elite group of data center technical talent. "[MCPc CEO] Mike Trebilcock took a business that was essentially in the ditch after 9/11 and grew it to a $300 million business with top technical talent that dominates the Midwest market," said the source. "Mike always said that CEO stands for customers first, employees and then owners. This deal is a testament to that philosophy."

MCPc's ATIG business, which includes Cisco, Hewlett-Packard and Dell data center specialists, has more than 100 employees across 14 offices and provides enterprise networking, data center, unified communications, cloud and managed services solutions with a high percentage of health-care and public sector customers.

Cleveland-based MCPc will retain its $167 million end-user client business, with 320 employees. That business will maintain a close working relationship with Logicalis. MCPc's client technology solutions group includes device management, life-cycle management, procurement, asset tagging, shipping, virtualization, data destruction and end-of-life services.

The acquisition, which is expected to close Sept. 1., provides MCPc ATIG customers with access to Logicalis' global reach and broader cloud computing enterprise portfolio. The vast majority of MCPc customers will maintain relationships with both MCPc and Logicalis

The deal comes with record consolidation reshaping the solution provider landscape. The source close to MCPc said the deal is likely to mark a trend in which regional solution providers without the cash to compete in a global cloud marketplace make deals with systems integration giants.

"For regional solution providers moving from the on-premise data center infrastructure market to the cloud market is cost-prohibitive," said the source. "They don't have the capital to make that transition, let alone keep up with the specializations and cost of doing business with the major vendors like Cisco, HP and Dell."

One of the secrets to the high premium, said the source close to MCPc, was the company's high solution provider market share in the Midwest market.

"Logicalis and MCPc saw an opportunity for continued growth in our respective areas of strength as a result of the acquisition," said Logicalis U.S. CEO Vince DeLuca in a prepared statement. "The acquisition will significantly strengthen Logicalis' established strengths in data center, collaboration, cloud and infrastructure, as well as further augment its expertise in the health-care and SLED vertical solutions where Logicalis already has significant capabilities and proficiencies. At the same time, MCPc will have the opportunity to hone its focus on its retained end-user services and solutions business. We are also looking forward to continuing a relationship with MCPc that will allow both companies to deliver even more value to our respective clients."

Trebilcock said the sale of the ATIG business opens the door for MCPc to invest in its end-user client business

"For MCPc, the sale of our ATIG business means we can invest in growing our areas of core competency while ensuring our existing clients in other solution areas gain from Logicalis' wider breadth of offerings and international presence," said Trebilcock in a prepared statement. "In working with Logicalis' leadership, it became really clear that our corporate cultures are very closely aligned, particularly in our commitment to our customers and employees. The culture and geographic alignment will not only provide our clients with a committed partner relationship, but will also offer our dedicated employees opportunities to further advance their knowledge and careers."

MICHAEL NOVINSON contributed to this story.