10 Private Equity Companies That Have Pumped Money Into The Channel In 2015

River Of Private Money

Private-equity investment in solution providers hit a record high in 2015 with a flurry of deals including six major investments in the past two months.

Among the biggest deals over the past three months include the acquisition of four 2015 CRN Solution Provider 500 companies: Pomeroy (No. 44), NWN (No. 70), Ahead (No. 86) and Atlantix Global Systems (No. 144).

Martin Wolf, president of Martinwolf M&A Advisors, a Walnut Creek, Calif., channel investment advisor, said the private-equity investment is helping many tech-savvy solution providers become much stronger financial properties.

"This is the most active year ever for private-equity channel investments," said Wolf. "They are attracted by the generally consistent cash flows and growth."

From the perspective of the private-equity firms, ’this is a growth industry,’ agreed Chris Froman, president and CEO of Pomeroy, a managed service provider based in Hebron, Ky. ’And IT is going to be in high demand for many years to come.’

Here are 10 private-equity firms that have invested in the channel this year.

Court Square Capital Partners

Headquarters: New York

Recent Investment: Ahead

Founded by former members of CitiGroup's private-equity group, Court Square in November acquired Ahead, a $250 million Chicago-based solution provider that was No. 98 on the 2015 CRN Fast Growth 150 list.

Ahead plans to leverage the Court Square deal to aggressively develop new solutions in areas such as enterprise service management, cloud infrastructure and mobility.

Court Square, which manages $6 billion in investments, has been a major player in the solution provider market, including CompuCom and unified communications systems integrator Strategic Products and Services (SPS).

"These are smart money guys that know the solution provider space and have a proven track record of creating meaningful shareholder value," said Wolf. "I would expect them to build out Ahead with other acquisitions and talent. They've done it before with other solution providers, growing them through acquisitions and organically."

Sverica Capital Management

Headquarters: San Francisco, New York

Recent Investment: Synoptek

Sverica Capital Management, a $500 million fund that focuses on midmarket companies, in November acquired Synoptek to help the Irvine, Calif.-based managed services powerhouse carry out an aggressive geographic and services expansion.

Synoptek plans to strengthen its presence in the Northeast and Europe, and grow its security and managed hosting services practices with the Sverica majority stake investment, said Synoptek CEO Tim Britt. "This is a milestone in our development," Britt told CRN. "It gives us a much stronger private-equity partner going forward."

Sverica is also an investor in Optiv, the $1.5 billion security behemoth that was created from the Accuvant and FishNet merger. Sverica was one of the investors in Accuvant.

Clearlake Capital

Headquarters: Santa Monica, Calif.

Recent Investment: Pomeroy

Clearlake Capital, which has more than $3 billion in investments, in October acquired managed service provider Pomeroy and combined it with Tolt Solutions, a technology services provider it acquired two years ago.

Pomeroy CEO Chris Froman, who will now oversee both Pomeroy and Tolt under what will be called the Pomeroy Group, said the merger of two companies with little client overlap will ’create a more formidable competitor,’ one with more than 4,000 employees and about $1 billion in annual business.

"Everything we do needs to lead to a managed service, so we're all about recurring revenue streams and managed services and long-term relationships," he said. "Tolt has a very similar philosophy as it relates to managed services. They have a very high percentage of recurring revenue."

Clearlake also owns ConvergeOne, a channel data center and communications behemoth with 1,200 employees with 1,400 industry certifications. ConvergeOne's strategic vendor partners are Avaya, Cisco, IBM, Microsoft and Interactive Intelligence. ConvergeOne, one of the top Avaya solution providers in the country, earlier this year acquired Sunturn, an Avaya Platinum Partner, and Mountain States Networking, a Cisco Gold partner.

Millstein & Co.

Headquarters: New York

Recent Investment: Atlantix Global Systems

Millstein & Co. was founded by Jim Millstein, the former chief restructuring officer at the U.S. Department of the Treasury and the principal architect behind the AIG restructuring during the 2009 economic crisis. In October, the New York-based fund acquired Atlantix Global Systems, a hardware refurbishing business, from CRN SP500 powerhouse Presidio.

Atlantix, No. 155 on CRN's SP500 list with an estimated $130 million in annual sales, sells reconfigured systems and telecom equipment from the likes of Dell, Cisco, HP, IBM and Sun Microsystems.

"This was largely empty calories for Presidio, which is focused on the cloud," said Wolf. "Millstein can build this up as a scale opportunity in a fragmented market. It's a smart move for both companies."

The Atlantix deal came nine months after Millstein's blockbuster acquisition of DLT, the $1 billion government systems integrator, from TZP Capital Group.

Millstein & Co. earlier this year received a minority investment from Stone PointCapital, a private-equity firm focused on financial services businesses.

New State Capital Partners

Headquarters: New York

Recent Investment: NWN

New State Capital Partners, a $250 million fund that focuses on midmarket companies, made its first technology deal in October, acquiring a majority stake in NWN, a $350 million solution provider growing at a double-digit clip.

The investment will provide capital for NWN to fund continued growth as it sets its sights on becoming a $1 billion cloud power.

NWN CEO Mont Phelps said NWN has the team, capacity and opportunity and now the cash to fuel continued growth particularly in its Ncloud hosted VoIP service, which has grown at a 100 percent mark for three consecutive years.

"This is all about seizing the opportunities in the market," said Phelps. "The cloud business is a big-boy game. Our competition now is the multibillion-dollar telcos and cloud services providers."

Kelso & Co.

Headquarters: New York

Recent Investment: Sirius Computer Solutions

Founded by Louis Kelso, the inventor of the employee stock ownership plan, Kelso & Co. in September acquired a majority stake in IT services provider Sirius, the $1.5 billion systems integrator, No. 28 on the 2015 CRN SP500.

Kelso's 10-year investment will make it possible for Sirius to be more aggressive acquiring firms with expertise in converged infrastructure, networking and services, said Sirius President and CEO Joe Mertens. Kelso replaces current owners private equity firm Thoma Bravo and Harvey Najim, who will retire as chairman 35 years after founding Sirius.

Mertens said he was impressed by Kelso's commitment to partnering with strong management teams and letting them run the business with very minimal interference.

Even though Kelso & Co. has raised more than $9.8 billion in capital over the past 30 years, the Sirius investment was just the second technology deal made by the private equity firm. In 2011, Kelso & Co. invested in Sentinel Data Centers, a New York fault-tolerant disaster recovery data center service provider.


Headquarters: New York

Recent Investment: SoftwareONE

The legendary private-equity pioneer, which has completed more than $400 billion in deals since it was founded 39 years ago, leveraged its European Fund IV in August to buy a 25 percent stake in $3.3 billion solution provider giant SoftwareONE.

"Proliferation of software application, growth in cloud adoption and increasing complexity of enterprise IT environments is the new reality," Jean-Pierre Saad, director of KKR's private equity technology team in Europe, said in a statement. "We are delighted to accompany SoftwareONE in this journey and provide them with growth capital for further organic expansion and M&A."

KKR has historically been active in the IT market, investing in solution provider TASC in 2009 and Web hosting company GoDaddy.

Columbia Partners

Chevy Chase, Md.

Recent Investment: MTM Technologies

Columbia Partners, which manages $3 billion in investments, in June purchased control of MTM Technologies, a Stamford, Conn., solution provider.

Columbia, which has been an investor in MTM for nearly a decade, said it had purchased control of MTM on behalf of its pension fund clients. As part of the deal, MTM received a new cash investment of $7 million from Columbia.

’We are very excited to be partnering with [MTM CEO] Steve Stringer and the MTM team,’ said Jason Crist, managing director of Columbia. ’We believe strongly in the business and the management team and believe they are very well positioned to provide continued best-of-class service to existing and new customers."

MTM Technologies' biggest trump card as it moves to grow the business may well be its status as a national Platinum Citrix partner. In fact, in February, MTM received the North America Top Influencer Award at the Citrix Partner Summit. That makes MTM the only solution provider partner to win that honor for two years in a row.

Columbia Capital

Headquarters: Alexandria, Va.

Recent Investment: New Signature

Columbia Capital, a major technology and channel investor with $2.5 billion in investments, in April made a $35 million investment in New Signature, the Microsoft Partner of the Year for the last two consecutive years.

The Washington, D.C.-based systems integrator is using the cash as part of a march to triple the size of its business in the next two years. "It's a lot of money," Chris Hertz, co-founder of New Signature, told CRN about the investment. "It's going to take us a long way." He expects the Columbia Capital investment to enable New Signature to hit the $500 million annual revenue threshold within the next five years.

New Signature has already used the cash to acquire two firms with a combined 50 employees to expand its presence into Toronto and boost its Microsoft Azure service offerings: CMS Consulting as well as independent software vendor and managed services provider Infrastructure Guardian (IG).

Columbia, which typically holds its investments for seven to 10 years before exiting, is no stranger to the solution provider market. Among its investments are cloud services superstar Cloud Sherpas, which was sold to $30 billion system integration behemoth Accenture in September, and Cisco solution provider giant Presidio.

Riordan, Lewis & Haden Equity Partners ( RLH)

Headquarters: Los Angeles

Recent Investment: Inspirage

Riordan, Lewis & Haden Equity Partners, which has more than $700 million in capital under its management, in January bought a stake in Inspirage, a Bellevue, Wash., global solution provider that won the Oracle Specialized Partner Of the Year Award in 2015.

" Since founding the company in 2007, the Inspirage team has built an enterprise that combines exceptional industry-specific expertise and deep technical knowledge,' said Kevin Cantrell of RLH. "As importantly, the team has created a culture that attracts and retains the best global talent by providing an environment that is both intellectually challenging and enjoyable. We look forward to helping the team build an even more successful future.’

Inspirage was ranked on the 2015 Inc. 500 with a 169 percent growth rate over a three-year period. ’This growth is just scratching the surface of what we expect next," said Inspirage CEO Srini Subramanian in a post on the company's website. "We have invested heavily in the past three years in training our team members and developing new solutions to help our clients adopt cloud-based solutions."

RLH also holds an investment in Clarity Solutions Group, a big data consulting and data analytics services based in Chicago.