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Rivals Reflect On The ConnectWise-Continuum Merger: ‘They Have A Lot Of Good Pieces’

SolarWinds MSP, Kaseya, and Barracuda weigh in on what last week's major acquisition means for the industry, the influence of private equity, and ConnectWise’s new documentation tool.

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Private Concerns About Private Equity

Many MSPs at IT Nation expressed reservations about the control private equity now wields over the competing platform products that are essential to their business. While not willing to publicly lob grievances at the owners of these tools, the theme was simple: the best decisions for customers don’t always provide an immediate return on investment.

Pagliuca said, while he understands where they are coming from, there are several kinds of private equity owners and Thoma Bravo, who owns the new combined ConnectWise and Continuum as well as a share of SolarWinds, is a patient one.

“This dark cloud that hangs over the term private equity is a little overblown and is rooted in a little bit of ignorance,” he said. “There are some private equity shops that are there to extract value by reducing cost, and headcount, and synergies, and squeeze the juice out of the fruit. But there are other private equity folks – and I think Silver Lake and Thoma Bravo are examples of this – who believe in growth and believe they will get the return by infusing growth. If that wasn’t the case, then I wouldn’t still be at SolarWinds, because they believe in the MSP market. They believe in the growth of the MSP market and the only way to do that is to invest in the people and invest in the partners and invest in the technologies.”

Voccola said all company owners are there to extract value from the business. He said the advantage of private equity is that it also provides the capital to give MSPs the tools and scale they need to run and grow their business. He added that those benefits can take time to materialize.

“Private equity firms optimize for profit, no more than if you and I started a company … When a private equity firm owns you, once it get stabilized, there’s money for R&D. The organization becomes professionally run, so you don’t miss product delivery dates, all those things that independent small companies suffer from … Here’s what happens very often in the first year or two private equity buys. They cut R&D, they cut costs, and the jack prices. That is very true. That happens for a period of about two years. Kaseya did that seven years ago. They have to fund the deal. So you’ll see that in the first couple years.”

Barracuda’s Babineau said the winner with private equity ownership is the MSP who will have better products with which to compete.

“Many will say how consolidation is great because it provides the proverbial one throat to choke; I see it differently in that it will drive competitive R&D which ultimately leads to better products,” he said in a statement.

 
 
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