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CRN Exclusive: NWN Sells Majority Stake To Private Equity Firm, Sets Sights On Becoming Billion-Dollar Cloud Power

A cash infusion from private equity will fuel the growth of NWN's NCloud hosted VoIP business and set the stage for strategic acquisitions.

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Mont Phelps

NWN, a $350 million solution provider growing at a double-digit clip, has sold a majority stake to private equity company New State Capital Partners as it sets its sights on becoming a $1 billion cloud power.

Under the terms of the deal, NWN CEO Mont Phelps, Managing Director Jane Linder and the senior management team will remain in place, retaining a substantial stake in the 15-year-old Waltham, Mass.-based company, ranked No. 72 on the CRN 2015 Solution Provider 500.

"This is going to give us the financial resources to drive towards our goal of becoming a $1 billion cloud services company," said Phelps in an exclusive interview with CRN. "This is all about seizing the opportunities in the market. The cloud business is a big boy game. Our competition now is the multi-billion-dollar telcos and cloud services providers."

[Related: NWN Driving Big Cloud VoIP Sales Growth By Beating Telecom Giants ]

The private equity participation will fuel the growth of NWN's NCloud hosted VoIP service, which has grown at a 100 percent mark for three consecutive years, said Phelps, who was named one of CRN's Top Disrupters of 2015 for beating telecom giants and driving dramatic sales growth with NWN's NCloud hosted VoIP service. "We have the team, the capacity and the opportunity to become the phone company of the future," said Phelps. "The only missing ingredient was the capital to execute."

The private equity participation also opens the door for NWN, one of the first solution providers to achieve Cisco's Master Cloud Builder specialization, to consider select strategic acquisitions as it builds out its cloud services offerings, he said. "We have invested a lot of money to prove and establish our business," Phelps said. "We have tens of thousands of users and a very large managed services business. This is going to allow us to drive and grow that recurring revenue."

One sign of NWN's cloud prowess is the company status as the only systems integrator going head to head against the likes of AT&T and Verizon as a voice and data services provider for the state of California public utilities under the CALNET3 government contract.

The private equity participation also opens the door for increased opportunities for growth for NWN's 550 employees, who will all receive a bonus as a result of the private equity participation. "They are now all part of a more substantial, vibrant, growing and well-financed company with a bright future," said Phelps. "We are going to continue to grow, and so will they with their careers. Business is a team sport. When the team wins everybody wins."

The NWN acquisition represents the first technology investment by New State Capital Partners, a boutique private equity company with offices in New York and Texas.

Phelps said he was particularly excited about teaming with New State Capital Partners because of the firm's ability to "align and build" the business with NWN as "the" technology services platform.

The deal marks a new chapter in the history of NWN, which was founded 15 years ago in the midst of the dot.com crash as a pure technology services company. Since then, NWN has has teamed with major strategic vendors including Cisco, Hewlett-Packard, EMC, VMware, Intel, Microsoft and NetApp to become one of the most respected solution providers in the country.

Phelps said the cloud focus will not dilute NWN's commitment to its major strategic technology vendor partners. "We have built a great relationship and business with these vendors," he said. "We see it continuing in the cloud era."

Over the past decade, NWN, which has served more than 2,600 customers in 49 states, has grown at a breakneck pace, including 20 percent organic sales growth in 2014. The company is on track to close out 2015 with double-digit sales growth, said Phelps.

"We're having a fabulous year," he said. "We have come a long way and now we are in a fabulous position. This is still all about world domination."

PUBLISHED OCT. 16, 2015

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