Cloud Blockbuster: Insight Buys Google Cloud Superstar SADA

Insight, which lists itself as one of the top 1 percent of all Microsoft solution providers globally, says the deal puts it in the the same class as Accenture and Deloitte as one of three biggest cloud players for Microsoft and Google.

Insight Enterprises Friday added “significant” cloud muscle to its arsenal with the acquisition of six-time Google Cloud Partner of the Year SADA for $410 million along with a potential earnout of up to $390 million.

Insight, which lists itself as one of the top 1 percent of all Microsoft solution providers globally, said the deal puts it in the the same class as Accenture and Deloitte as one of three biggest cloud players for Microsoft and Google.

Insight said the additional earnout for SADA owners has a target of $210 million based on SADA’s three-year performance after the close of the acquisition. Further, Insight said it expects the deal to add 20 to 30 cents per share to its adjusted earnings per share in December 2023 and 55 to 75 cents per share in 2024.

SADA delivered net revenue of $251 millon in 2022 and gross profit of $200 million.

The deal packs a big cloud punch, combining Insight, No. 16 on the 2023 CRN Solution Provider 500 with a multibillion-dollar relationship with Microsoft, with SADA, a Google Cloud Premier partner, No. 108 on the 2023 CRN Solution Provider 500, with approximately 850 professionals focused on Google Cloud.

SADA has 10 Google Cloud specializations, including security, infrastructure, cloud migration, data analytics, application development, location intelligence and machine learning.

Insight, meanwhile, has 22 Microsoft specializations with more than 65 Microsoft Partner of the Year awards.

“This is a really significant move by Insight, consistent with [Insight President and CEO] Joyce Mullen’s theme of being more of a cloud service provider,” said Martin Wolf, president of martinwolf M&A Advisors of Walnut Creek, Calif., one of the top channel investment advisory deal-makers. “It changes the character of Insight in the sense that it makes them less Microsoft-centric. I think Insight is going to do quite well with SADA.”

The acquisition comes with the valuation of born-in-the-cloud solution providers like SADA on the rise, said Wolf. “The cloud solution providers are growing faster with more recurring revenue with no inventory and higher margins,” he said.

The deal also comes with Insight trading at about 20 times earnings, said Wolf, giving the company the ability to buy a high-valuation cloud partner without dilution.

Insight said the deal extends its AI capabilities across two leading generative AI platforms.

SADA CEO Tony Safoian, who has built SADA into a Google cloud powerhouse, told CRN earlier this year that he believes Google Cloud is in prime position to win the leadership throne in the new era of artificial intelligence as customer demand is at an all-time high.

“We are having more conversations with almost every customer about the realm of the possible with AI, in which Google Cloud is seen as the market leader,” Safoian told CRN.

At CRN parent The Channel Company’s Best of Breed conference in October, Mullen said it is critical that the channel move aggressively to provide AI solutions for customers. “AI is not going to replace you,” she said. “But you could be replaced by somebody who knows how to use AI better than you.” She promises employees who figure out how to automate “a bunch of that soul-sucking work” another job at Insight.

Insight shares were up $2.62, or 2 percent, to $154.04.