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MSP All Covered Snags Cloud Guru Techcess To Enter Houston Market

The managed services giant has acquired the fast-growing cloud computing services provider to bolster its geographic reach and mobility offerings.

Managed services giant All Covered has acquired a fast-growing cloud computing services provider to bolster its geographic reach and mobility offerings.

The deal with Techcess Group of Houston, which has annual revenues nearing $10 million, will increase the workforce at All Covered, the IT services division of Japanese printing behemoth Konica Minolta, to more than 800 employees. Foster City, Calif.-based All Covered, which appears in the Elite 150 of CRN's 2015 Managed Service Provider 500 list, has acquired more than 20 MSPs in recent years.

Terms of the deal were not disclosed.

[Related: Solution Provider Shares Lessons On Surviving The Oil Market Slump]

Jason Wright, Techcess' vice president of sales and marketing, said the company was looking for an injection of cash to help Techcess enter new markets and geographies and spur further growth. The deal closed in early April and was announced Tuesday, Wright said.

"It was becoming harder and harder for us to grow at the numbers we had been growing at consistently over the years," Wright told CRN. The company employs 50 and appeared on CRN's 2014 Next-Gen 250, which recognizes solution providers setting the pace for the rest of the channel.

On All Covered's end, Wright sees the move as a geographic play, as the company to date has no presence in Houston, despite the city's being the third-largest market in the United States for Konica Minolta, with some 8,000 end users. As Konica Minolta's print business declines, Wright said, the company is looking to build a nationwide MSP to cross-sell through its dealer channels into its existing customer base.

In fact, Wright said, All Covered has looked at roughly 50 other acquisition targets over the past five or six years before settling on Techcess.

"We bring a level of critical mass they didn't have and couldn't build," Wright said. With Techcess' reputation and name recognition in the market, Wright said, he should be able to convince 15 percent to 20 percent of Konica Minolta's Houston-based clients to begin consuming managed services through All Covered.

Wright said he expects All Covered to double its Houston-area head count to 100 employees in the next 18 to 24 months. All of Techcess' employees joined All Covered, Wright said, with Techcess President and CEO Hugh Sazegar becoming All Covered's managing director in Houston.

What really sealed the deal for Techcess, though, were the financials. Wright said All Covered was exceptionally generous with its valuation of Techcess based off the MSP’s EBITDA (earnings before interest, tax, depreciation and amortization).


"You just don't walk away from that kind of offer," said Wright, adding that Techcess' valuation was so high because most of its customers were in the cloud and locked into three- or four-year contracts. A couple of other companies had expressed interest in recent years in buying Techcess, Wright said, but none of the other offers compared with what All Covered brought to the table.

Other factors in Techcess' decision to sell included plummeting oil prices -- a barrel of oil went from selling for a high of $149 per barrel to just $50 per barrel -- depressing Techcess' sales in the Houston area, as well as the main two business partners nearing 60 years old.

Coming under the All Covered umbrella will make it easier for Techcess to provide its existing customers with nationwide cloud service and around-the-clock support, Wright said. All Covered staffs its Network Operations Center (NOC) 24/7, Wright said, while Techcess had on-site staff for its NOC only during business hours and was on-call the remainder of the time.

Techcess had also been unable to service many larger customers in the cloud since it had a data center only in Houston, Wright said. All Covered has cloud centers in Phoenix and Reston, Va., he said, meaning Techcess will be able to offer more infrastructure continuity to its cloud customers with a broader geographic footprint.

All Covered has several service offerings Techcess doesn't carry today, including information security, database administrative service and a health-care vertical practice, Wright said. The MSP has 25 offices across the United States, he said.

All Covered President Todd Croteau told CRN in April 2013 that the company is most interested in acquiring MSPs with 10 to 250 people and annual revenue of $6 million to $10 million, of which at least 60 percent to 75 percent is recurring. Techcess fits all of those criteria.

Croteau did not respond Tuesday to a request for comment.

Recent acquisitions by All Covered include: Southern California-based IT services consulting business KnowledgeCentrix in January 2014; Phoenix-based technology solution provider InterTech Computer Products in December 2012; health-care-focused Irving, Texas-based MSP WaveTwo in August 2012; and the managed services division of Compuquip Technologies of Miami, also in August 2012.

PUBLISHED MAY 12, 2015

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