10 Things To Know About Presidio Acquisition

Mergers And Acquisitions

The big channel news of the week so far is that Presidio, No. 22 on CRN's SP500 list, has been acquired. Here's what you need to know.

What's The News?

On Monday, Presidio announced that it would be acquired by Apollo Management Group, a global alternative investment manager with a variety of investments. Apollo is buying Presidio from current private equity firm owner American Securities. The terms of the deal were not disclosed.

"We are pleased to be partnering with [Presidio CEO Bob Cagnazzi, pictured], his talented management team and Presidio's outstanding workforce. Together, they have successfully built Presidio into a leader in the IT services arena, and we look forward to supporting them in their ongoing growth initiatives," Matthew Nord, partner at Apollo Global Management, said in a statement.

What Has Presidio Been Up To Lately?

Presidio has been on a growth trajectory over the past three years, with double-digit, year-over-year growth, Cagnazzi said. According to a May Reuters report, the company has around $2.3 billion in sales and $180 million in earnings. Presidio boasts approximately 6,000 customers in the U.S. and more than 2,200 employees, according to a company statement.

Over the past couple of years, Presidio has worked to expand its service delivery models, including the Presidio Managed Cloud, an offering Cagnazzi called a "game-changer." In addition, Presidio over the years has acquired multiple smaller solution providers, including INX in 2011 and BlueWater Communications in 2012.

Who Is Apollo Global Management?

Apollo Global Management and its subsidiaries handle investments totaling $164 billion across private equity, credit and real estate. Its investment focus areas are numerous, primarily in the chemical, commodities, consumer and retail, distribution and transportation, financial and business services, manufacturing and industrial, media, and packaging and materials industries. It also focuses on satellite and wireless businesses. Presidio will be one of the first investments in a brand-new $18 billion private equity fund with Apollo, one of the largest private equity companies in the world.

Why Is American Securities Selling Presidio?

American Securities bought Presidio in 2011 for an undisclosed amount. After three-and-a-half years, the solution provider has hit the private equity firm's five-year goal for return on investment, Cagnazzi said. To hit that goal, Presidio has seen strong growth over the past three years, with a double-digit CAGR, he said. CRN reached out to American Securities, but the private equity firm has not replied for comment.

Why Did Presidio Choose Apollo Global Management?

Presidio had many prospects for a sale, Cagnazzi said, but Apollo was, by far, the clear choice for a deal. He said he felt Apollo was the right choice for Presidio because it has a similar view of the market and shares a common vision for Presidio's future. CRN reached out to Apollo, but has not heard back for comment.

Some of those common visions are how Presidio will deal with a rapid market expansion around multivendor solutions, and more capital-intensive cloud and managed services offerings, Cagnazzi said. That is driving the need for more investment and market consolidation, he said.

What Will Change In Presidio's Business?

In the short term, not much will change from the Presidio acquisition. Cagnazzi said that Presidio will keep its strategy, business structure, go-to-market and key partners the same going forward. However, he said that employees, vendor partners, clients and stakeholders can expect to see increased investments in the long term that will boost the Presidio business.

Can We Expect More Acquisitions?

Cagnazzi said that Presidio will grow both organically and through acquisition over the coming years. He declined, however, to say exactly when those acquisitions might take place or what the company's strategy is. Over the past few years, Presidio has acquired quite a few smaller solution providers, including INX in 2011 and BlueWater Communications in 2012.

Is An IPO Still On The Table?

Rumors have swirled since May about a possible Presidio sale or IPO, based on a Reuters report citing unnamed sources. While the sale proved to be true, Cagnazzi said that an IPO isn't off the table in the long term.

"That's something that is not really in consideration at this point in time. Will it be at some point in time? Possibly," Cagnazzi said. "It's certainly not out of the question that there would be an IPO at some point in time in the future, but what we're concentrating on right now is all the opportunities that we have to grow this business with Apollo," he said.

Can We Expect Another Presidio Sale Soon?

Cagnazzi said that Presidio won't be going anywhere soon. He said that he expects a long future with Apollo, and believes that Presidio was purchased as an investment to serve as a platform for long-term growth for Apollo.

"We are not being bought for a short-term return for Apollo, where they would turn around and sell us. We are being purchased as a platform to create long-term growth in the business. Apollo is a long-term investor," Cagnazzi said.

What Sort Of Investments Can We Expect?

Cagnazzi declined to get specific on what types of acquisitions and investments to expect down the road. However, he did say that clients could look forward to expanded geographic coverage, and solutions and services depth. That growth will be driven both organically and through acquisition, Cagnazzi said.

"Over time, they'll see the benefit of increased investments and acquisitions."