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M&A the Meriplex Way
Why a big, ambitious buy-side MSP thinks you’re better off joining them than fighting them.
Climbing interest rates appear to have slowed the M&A wave producing region- and nation-spanning MSPs in recent years.
Per reporting in TechTarget, for example, IT advisory and investment firm GP Bullhound tracked a 19% dip in transactions involving “digital services” companies during the second half of 2022, and thinks it could be 2024 before a lot of would-be acquirers are ready to buy again.
But deals are still happening, and there are lots more to come. Private equity and venture capital funds closed 2022 with a record $3.7 trillion of “dry powder” to invest, according to Bain, and IT providers with margin-rich recurring revenue are as tempting a way to invest that money as ever.
And that leaves everyone who ends up on the receiving end of offers from PE-backed MSPs with an interesting beat-‘em-or-join-‘em decision to make.
Neil Medwed (pictured) chose the join ‘em route and hasn’t looked back. The company he sold his Dallas-based managed services practice to back in August 2020, Houston-based Meriplex, was an 80-person telco specialist at the time recently embarked on a campaign to expand into managed IT as well.
“I was the second major acquisition,” Medwed recalls. Today, with help from two private equity investors—first Clairvest Group and more recently Vitruvian Partners—Meriplex has over 700 employees in 14 cities and Medwed is its vice president of corporate development and M&A, not to mention an unabashed enthusiast.
“Becoming part of Meriplex allowed me to be so much bigger and better than I ever could have otherwise,” he says, adding that there’s more growth to come. “It’s my personal goal to have a Meriplex office in every NFL city within three to four years,” Medwed vows.
Could he have stuck it out against a company that big on his own? Probably, he believes, but it wouldn’t have been easy. “I would have hated to have to compete against Meriplex,” Medwed says.
For one thing, matching up in areas like security without a SOC and in-house analysts would have been challenging. “It’s very difficult for a smaller MSP to have the talent necessary to be as effective as a Meriplex in protecting an environment,” Medwed says.
Retaining talent, not just in security but elsewhere, wouldn’t have been easy either given the training and advancement opportunities a large MSP can offer, he continues. “The higher-level talents usually want to do something much bigger than desktop support and doing small server implementations.”
Medwed doesn’t emphasize it, but the efficiencies and pricing power companies like Meriplex command are hard to beat too. Ultimately, though, just how much market share big MSPs seize will depend on whether or not they can deliver the personalized, small MSP service many SMBs covet. Medwed insists Meriplex can do it.
“We have both centralized services and decentralized services,” he says, noting that acquired MSPs manage the same local clients with the same familiar people after a deal as before. “If Steve and Sue are used to dealing with customer A, for example, they’re going to continue dealing with customer A.”
I know a lot of very good smaller MSPs dead certain that relationships are their hole card in the contest against competitors like Meriplex. Their customers will eventually decide if they’re right.
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This week’s obligatory AI update
ConnectWise has officially added AI-based PowerShell scripting to its ConnectWise Automate RMM solution, and extended it to Automate’s younger sibling, ConnectWise RMM, as well. The feature runs on a hosted instance of OpenAI GPT and has been available to Automate users through a public preview since February.
Good on you, ConnectWise, for taking a couple months to test the functionality rather than give in to the AI hype cycle and rush it immediately to market. Commendable as well that the press release about this news emphasizes the importance of running the new feature’s output past an experienced technician, “someone knowledgeable who can review, find any errors, edit commands, or update the code.” Artificial intelligence is no substitute for an experienced developer and pre-release testing.
ResumeBuilder.com, meanwhile, recently surveyed 1,187 business leaders and found that of the 92% who are hiring, an astonishing (to me, at least) 91% are looking for people with ChatGPT experience.
More specifically, 29% of companies are searching for prompt engineers, and one in four of them expect to pay a starting salary in excess of $200,000. Watch Vitalik Buterin prompt his way to a strange but apparently legitimate insight about travel times and you just might think the money’s worth it.
How about a little security nightmare fuel before the weekend?
Kudos to the inestimable Dave Sobel and his Business of Tech podcast for calling attention to some ugly data out of Bitdefender last week. Fully 42% of IT professionals globally have been asked to conceal a data breach, and 29.9% have actually followed those orders. Bad enough, but far worse here in the U.S., where 70.7% have been told to keep a breach confidential and 54.7% have done so. Um, there are laws about this kind of thing, people.
Want some more disturbing security data before heading into the weekend? Here are two nuggets from earlier this week:
We all know there’s a ton of ransomware out there, but this finding from ExtraHop underscores just how fast it’s proliferating. In 2021, organizations reported having experienced four attacks over the prior five years on average. By 2022, it was an average of four attacks in one year. A whopping 83% of victims have paid the ransom at least once.
Remember when double extortion ransomware, in which data encryption is followed by a second threat, was the new big thing? Turns out mere double extortion is increasingly only for lazy thieves these days. According to CyberEdge Group, 37.6% of ransomware victims last year were hit by triple or quadruple extortion.