Coretelligent CEO On Building A Platform MSP And Formulating An Acquisition Strategy

‘Coretelligent is now one of the largest platform MSPs in the U.S. Very few MSPs have been able to achieve our level of size in terms of clients and team members, and in terms of revenue, coming from a bootstrapped, individually founded organization,’ says Kevin Routhier, Coretelligent founder, president, and CEO.

The Power Of The Platform

Coretelligent was founded in 2006 as one of thousands of MSPs in the U.S. However, Kevin Routhier in 2016 made a move to fuel growth by accepting private equity money and transforming the company into a platform MSP. And five years later, Routhier -- the firm’s founder, president and CEO -- brought in a second private equity firm to accelerate growth.

With the funding, Coretelligent became a platform MSP. Platform MSPs build their business models around acquiring other MSPs with a goal of scaling their managed services business beyond what smaller MSPs typically can achieve.

For Coretelligent, that has meant a total so far of seven acquisitions, including the recent acquisition of Advanced Network Products (ANP) in a move to expand its reach to the mid-Atlantic area while picking up a solid talent and customer base.

[Related: Preparing An MSP For Private Equity: ITPartners+ CEO Lays It Out]

No dollar value for that acquisition was provided.

ANP provides a geographical expansion and a team of IT professionals who can help Coretelligent continue its digital transformation and AI expansion, Routhier told CRN. Don’t be confused by that company’s name, he said.

“The name Advanced Network Products, by the way, is a little misleading because they are a full service organization,” he said. “They’re not just out there reselling network equipment.”

Coretelligent remains focused heavily AI and end-to-end services including a wide range of support, compliance, security, managed services, and digital transformation services that includes the company’s own AI capabilities, Routhier said.

That focus on AI, which requires the kind of scale the average MSP does not have, is key to Coretelligent’s future, Routhier said.

“When we talk about AI, we’re really enabling the analysis and the in-depth business analytics and intelligence in the extraction of that and bringing it to the forefront,” he said. “That is here now. It’s steeped in what we are doing in our approach to digital transformation and the continued exponential growth of the data within any organization. This we believe will be the one of the primary responsibilities of MSPs over the next five to ten years.”

The MSP business is a rapidly-changing one. Read CRN’s interview with Routhier to see how platform MSP Coretelligent is helping lead the change.

What is Coretelligent?

Coretelligent is a comprehensive security and cloud architecture organization focused heavily on AI and end-to-end services covering the full gamut of support, compliance, security, managed services, and what we typically refer to as digital transformation services steeped within our AI capabilities. We are focused on midmarket clientele. We’re heavily verticalized in our approach in the financial services and life sciences-slash-healthcare sectors. We also have a very strong presence in the B2B space.

I founded Coretelligent back in 2006 as a people business. We’re here to enable productivity, the protection of client intellectual property, and ultimately take our clients’ business plans and help connect them to appropriate IT roadmaps to bring them through their company lifecycle planning and their own business strategy.

Our success comes from a few things. Number one is having terrific people. Our team is second to none, and they enable our success with their commitment and their broad capabilities within the technology spectrum that our clients depend on. And we have an enviable A-plus client list. It’s the who’s who in the financial services and life sciences spaces. And we’ve maintained these very strong, highly integrated relationships in some cases for 10 to 15 years. Once we bring clients on, we keep them. Coretelligent has dedicated services for support, compliance, security, and managed services. We are built out so that our clients sit at the center of our universe.

You mentioned AI. What is Coretelligent doing with AI? What do you do to help customers using AI?

As we think about what IT will look like in the future and what managed services means to our clientele, the next stage of evolution within IT is in terms of data. Data is the one thing that every client is creating every hour of every day. It is the lifeblood of their business. We as technologists are stewards of that data, stewards of their productivity, and ultimately making sure that we’re not only securing this data and making sure it’s accessible, but how do we as the next step make it more valuable to our clients? How do we help them extract the value within their data that they may not be seeing? What do their processes look like across different departments in an organization? How do we take data striped across different parts of the company and bring it to life to help clients mitigate risk or monetize new revenue streams? Without understanding what that data is actually trying to tell you as a client, you’re probably missing some level of opportunity for business optimization.

For AI, we’re bringing the forthcoming Microsoft Copilot and Azure AI suite, the work being done with ChatGPT and in other realms of Google Workspace or AWS, into a development and digital transformation process that leverages some of these engines along with our own intellectual property, our own expertise, our own coveted IP. That lets us take these different datasets and start producing conclusions and information and different ways of thinking that the data may not on its surface make readily available to clients’ naked eyes. So when we talk about AI, we’re really enabling the analysis and the in-depth business analytics and intelligence in the extraction of that and bringing it to the forefront. That is here now. It’s steeped in what we are doing in our approach to digital transformation and the continued exponential growth of the data within any organization. This we believe will be the one of the primary responsibilities of MSPs over the next five to ten years.

Did you say ‘coveted’ IP?

Yes. One of many things that differentiates Coretelligent is we invest. We simply don’t look for services to go out and resell. We’re not a company that’s going to say, ‘Let’s go resell some licensing, or let’s go resell some equipment. And let’s try to wrap some services around a piece of hardware or a piece of software.’ We are truly a service-oriented organization. What that means is, we are pioneering with the DevOps opportunities that we have within our client base.

A year and a half ago we purchased a company called Chateaux, which is now the backbone of our DevOps organization, our digital transformation services, and our AI engine. And we did this with an eye towards looking forward to the evolution of the MSP and really trying to not only continue to bring our existing value propositions to bear, but to show to our clients and our prospects that we are forward thinking. That we are not looking at our job as simply plugs and bugs, support service, helping somebody set up new devices. That we are really thinking holistically about each customer’s enterprise, and what role the data they’re producing and we are protecting going to play in their business? It’s not just about what we’re doing today, but how well are we setting up our clients for success in the coming years with the information that they’re producing today. And I think that that’s a very prominent opportunity today, and certainly something that we feel very strongly about as part of our strategy. So when we talk about our ‘coveted IP,’ we’re talking about the fact that we are looking at this a little bit differently from most of our competitors.

Talk about your private equity partners and the building of Coretelligent into a platform MSP.

I grew the company for 10 years before bringing on a private equity partner in 2016. With VSS (Veronis Suhler Stevenson) out of New York City, we grew the company for an additional five years, and tripled our size. In 2021, we brought in [Minneapolis-based] Norwest Equity Partners as our primary investor. We’ve had a very successful partnership. VSS remains invested, and my family and I are still very heavily invested in the business. And we’re very pleased with our progress.

Coretelligent is now one of the largest platform MSPs in the U.S. Very few MSPs have been able to achieve our level of size in terms of clients and team members, and in terms of revenue, coming from a bootstrapped, individually founded organization. I founded Coretelligent. I bootstrapped the business, and grew it for 10 years, but could not have done so without the help of our incredible team and leadership, many of whom are still here today in very prominent leadership roles.

VSS helped us diversify our growth strategy. Obviously, organic growth is king. We want to make sure that we’re acquiring the right level of clientele, what we call the ‘ICP’ or ‘ideal client profile,’ and bringing them into our organization, and that is very much an organic process. However, like any good growth strategy, we want to have a multi-pronged approach. And selfishly, I wanted to make sure I wasn’t going to collateralize all that growth with my personal assets. Bringing in a well-heeled investor with a terrific track record of enabling growth and bringing companies like Coretelligent to the next level was really important for us. In the first five years with VSS, we were able to make three acquisitions. We’ve been very selective about who we brought on. We fully integrate every one of our acquisitions.

With ANP, we’ve now done seven. We feel the quality of the cloth of the companies that we have welcomed into the Coretelligent family has been second to none. These are businesses that were founded by responsible owners that were not running them as a lifestyle business, but truly putting their clients and their people as the first priorities of creating their legacy. And ANP is no exception.

What was your interest in ANP?

We have an investment thesis that we look at for our prospective acquisition targets. We typically look at anywhere from 10 to 15 requirements, and we have an artificial rule of, let’s make sure that we’re ticking off about 65 [percent] to 70 percent of these requirements as we think about acquisition. And I have to tell you, ANP differentiated itself by having nearly 100 percent of the attributes that we look for in a prime acquisition target.

This is an organization that’s been around for over 30 years. It has had very little attrition, and most of that has come from economic events. They have done an outstanding job with net revenue retention and gross client retention. They’re in a strategic geographic area. We view the mid-Atlantic and the tri-state area as a great investment opportunity as we continue our roll up strategy across the U.S. And ultimately, they had the right revenue profile and the right level of profitability. They were highly verticalized with very similar verticals: life sciences, healthcare, and financial services. We felt pound for pound they were one of the strongest MSPs available today. Actually, I shouldn’t say available. They weren’t available. But because of the trust that we forged with the Mulvey family, who previously owned ANP, we could showcase how alike our two companies were not only in the shared services and technology stack and all the things that will make for a smooth integration, but most importantly, how we care about clients. And for us, when you’re talking about customer culture and internal culture, there’s really nothing more important to the success of an acquisition and integration than those two pieces. We felt this was an organization that checked these boxes in spades.

How did your two companies come together?

We are very fortunate to have a very strong network of investment banking professionals. In this case, [Washington, D.C.-based] Focus Investment Banking made a proactive introduction while getting ready to bring ANP to market. And we’re certainly glad they did. They felt that Coretelligent, along with many others, would be strong suitors for ANP. And when we got connected, there was a very natural camaraderie between the two teams. It was an excellent character fit from both sides.

It was a competitive acquisition. We certainly had to work hard. There’s no shortage of competition in the MSP space, but between our leadership team and our terrific investors, we succeeded. We approached the acquisition like we always do, by being open and honest and talking through the positives of a potential acquisition, and also some of the risk areas.

So Coretelligent had competition in terms of other MSPs looking at acquiring ANP?

I am not privy to the actual number of interested parties, but I can tell you it was dozens. We’ve done a few deals with Focus, so we are trustworthy as a buyer. We do what we say we will do, and that gives them great confidence in recommending a potential partnership with a firm like Coretelligent. But they ran a very tight and tough process, to the benefit of their client, ANP. We feel we paid a market prevailing price and got a tremendous asset as a result. So it’s truly a win-win for all the parties involved.

Did you acquire ANP primarily for geographic purposes or expertise?

It was a combination of a lot of things. They have a terrific team. I mean, the talent level of their team from an engineering prowess basis is very impressive. We all know how hard it is to find tech talent. It’s still a very tight job market. And we saw an opportunity to bring in a group that is very well versed in the Microsoft Azure stack and that has done more work in terms of depth of integration within the Microsoft technology stack than most MSPs. We felt it was a very nice complement to the engineering structure that we currently have in place for our different practices. In addition to that, we really appreciated their client list, an A-plus client list very similar to ours in terms of vertical focus. And the geography doesn’t hurt at all. certainly when we look at the location of talent. Also really important was the culture, their thinking and their approach to clients.

Do you have any more acquisitions keyed up?

Absolutely. We have a very strong pipeline. There’s a lot of opportunity out there. But ultimately, how you look for it, where you look for it, and how you approach it is the way you differentiate yourself from the crowd. There’s a lot of buyers. There are some buyers that aren’t platforms. There are some that are platform MSPs like Coretelligent. And that creates a unique competitive situation, because you’re not only vying against your MSP brethren. You’re also competing against potential sponsors in the private equity space. And so striking the right value proposition, striking the right level of trust, and really being able to back that up with an agile, transparent process is so important to the success of an acquisition strategy.