Texas-Based The 20 MSP Buys Two Firms In One Month

‘We’re looking at next year doing another 30 [acquisitions]. We have gotten the integration down to a smooth, clean 30 days. We can move them so that, by the end of that first 30 days, our integration is done,’ says The 20 MSP CEO Tim Conkle (pictured).

The 20 MSP, a managed services provider which may be the most prolific acquirer of fellow MSPs in the industry, this month acquired two more and expects to accelerate its buying spree next year.

The two new acquisitions, Athens, Ga.-based Managed IT Systems and Topeka, Kansas-based Network Technologies of Kansas, bring The 20 MSP’s count in the last 14 months to 26, said Tim Conkle, CEO of the Plano, Texas-based company.

“And we’re looking at next year doing another 30,” Conkle told CRN. “We have gotten the integration down to a smooth, clean 30 days. We can move them so that, by the end of that first 30 days, our integration is done.”

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The 20 MSP’s business model is unique and has two parts. The first is a group of member MSPs called The 20 Group that sign on with The 20 MSP to use the company’s tools, sales processes, and operating procedures to run their own business.

The second piece is The 20 MSP’s acquisition model, which identifies MSPs within The 20 Group as potential acquisition targets and then acquires them. The owners of nearly all the acquired MSPs have remained with The 20 MSP.

Both Managed IT Systems and Network Technologies of Kansas, like all The 20 MSP’s acquisitions, are already part of The 20 Group, Conkle said.

“And it’s because they’re all part of The 20 Group, we had 80-something-percent of the integration done before we bought them,” he said. “I had a big group of bankers in the office recently, and they went on and on and on about how this is unbelievable, blah, blah, blah, blah, blah. And I told them, ‘I know, that’s why we had to do it.’ Because there’s no way to believe it if I would have said, ‘We’re gonna roll up 26 companies in 13 months.’ Everybody’s like, ‘You’re full of [expletive].’”

However, The 20 MSP has systemized the acquisition process, Conkle said.

“The typical MSP, if it sells, not only do they have to pay the legal expenses, but typically if they use a third-party company to help with the sale, then they’re gonna spend $100,000-plus,” he said. “We have got the cost of acquiring a company, with legal and all expenses, everything all in but the price of the company, to less than $10,000 now. I mean, it starts to get really easy. Boom, boom, boom, boom, cookie cutter, right? Really quick.”

A big part of the quick acquisition process is the trust the members of The 20 Group have in the organization and Conkle, he said.

“The members trust me,” he said. And that’s a big thing.”

That said, companies looking to get acquired also need to do their own due diligence, Conkle said.

“I was talking mainly on my side,” he said. “But when I’ve got it down to less than $10,000, their lawyer fees should be less than $5,000 to completely go through all of the APA (asset purchase agreement) and everything and do the due diligence on what it’s going to look like. And there’s enough people who have gone through it now, and it’s been reviewed so many times by legal on the opposing side, so now it just works. I can’t even imagine somebody with a $5 million MSP selling in any other way.”

This holds true for MSP owners looking to de-risk their business, regardless of whether they are going to retire or not, Conkle said.

“There’s a lot of opportunity,” he said. “I think if I was given time in a room with people that sold their companies with the experience and what got and all that other stuff, I think the majority of them would agree with me.”

The 20 MSP so far has made only one acquisition outside The 20 Group, and it went well, Conkle said.

“I think what made it work outside the group was that they were on the Kaseya stack, so that was easy to transition them,” he said. “A little bit deeper due diligence has to happen on both sides. But our APA didn’t change. Our operating agreement didn’t change. So I think the next iteration that you’ll see from us is, we will do probably 10 percent of our acquisitions outside of the group.”

That move aims to prove that The 20 MSP’s acquisition engine works, Conkle said.

“When certain criteria are met, it works every time, member or not member,” he said. “And so really, it’s just a proving ground, hopefully, for who comes next.”

However, Conkle said, he is hoping he doesn’t have to do very much of that.

“At some point, you have to widen your moat,” he said. “Although I’ve still got 150 companies lined up, so it’s like I have to hunt for it. But if the right opportunity comes along, I’m gonna ride it.”

The 20 MSP in January expects to acquire an MSP that joined The 20 Group specifically to be roll into the group.

“My requirement was, you have to be in the group for six months,” he said. “In other words, they start lining up, we really see culture and all the other things that go with it. And then we go from there. But they literally joined the group because they’re like, ‘Hey, not only do we want to roll up, but we want to be part of this bigger thing.’ So their strategy was to come in and do it. And so I thought that was really cool, because that’s something we hadn’t seen a lot of. But now we’re seeing more and more companies say, ‘Hey, we’re really interested in rolling up. Tell us how we get deals, how we get maximum return.’”

One member of The 20 Group wanted to roll up into The 20 MSP, but its finances didn’t look good, Conkle said.

“I told him, you do this, this, this, and this, and get your labor under control, and you’re gonna get twice what your company’s worth now,” he said. “Now, a lot of people say, ‘Well, Tim, why didn’t you just do that yourself?’ Well, because there’s so much upside in this, I don’t have to take advantage of anybody. So I told this guy, ‘Hey, take six months, put your stuff right, and you’ll get twice what your company’s worth now.” And so he’s in. He should roll up in either February or March.”

There is plenty of success to go around for everybody, Conkle said.

“Sometimes you say, ‘Hey, you’re not in the right frame of mind, or your company’s not in the right frame of mind,’” he said. “Let’s fix these few items. And then I still roll you up. I’m not saying no. At the end of the game, my goal now is to make millionaires out of people, not become wealthy. I’m already wealthy, in most people’s minds.”

With the acquisition of Network Technologies of Kansas, The 20 MSP gets a second office in that state, Conkle said. The company plans to consolidate the two to improve scale and synergy, he said.

“So it was a strategic buy, although they came with some really good pieces,” he said. “It’s a good company, good employees, good people. And to us, it just made sense. Right now we’re in 28 markets. You’ll start to see us strategically buy members that are around that. It lets us slam them together. Now instead of having four offices, we can have one.”

Managed IT Systems brought The 20 MSP a new footprint as its first step into Georgia, Conkle said.

“It just widened our footprint, right in Atlanta,” he said. “It’s a great market, a really good company with a really good set of owners. That company was owned by a married couple. And of course they had employees. The wife won’t stay, but her husband, who was half-owner, is going to stay.”

At Network Technology of Kansas, The 20 MSP is keeping the team, but for the owner, selling the company was his retirement strategy, Conkle said.

“’I’m gonna sell to The 20, invest a little bit back, get a second bite of the apple, and I’m going to retire,’” he said. “And so it’s a really cool thing. I would say 90 percent of the time we keep all the people.”