The 20 MSP Acquires Three MSPs, Making 19 Acquisitions In Under A Year

‘We have this self-perpetuating animal that we just keep growing, putting more money into it. The more you roll up, the more you make. ... This industry is still so splintered that there’s tons of consolidation that’s to be done. Tons. I mean, it’s unbelievable how much is out there,’ says The 20 MSP CEO Tim Conkle.

The 20 MSP has acquired three more MSPs, making a total of 19 MSP acquisitions since late last year.

The acquisitions of Kansas City, Kan.-based UNI Computers; Naples, Fla.-based CyberSecure IT Solutions; and Oklahoma City, Okla.-based The Computing Edge give The 20 MSP an opportunity to expand its managed services reach into new territories, said Tim Conkle, CEO of the Plano, Texas-based company.

The 20 MSP’s acquisitions have typically been focused on metropolitan regions where the company has yet to build a presence, but that is changing, Conkle told CRN.

[Related: MSPs And Private Equity: What Makes An MSP Stand Out From The Pack?]

“All these acquisitions are strategic in the sense of new markets and new expansion,” he said. “I think we’ll start to see probably 12 months out where we buy in the same markets and just stack on top and then start scaling those markets out.”

The three newly acquired MSPs bring an average of about $1.5 million in revenue in addition to some really good people to The 20 MSP, Conkle said. He declined to discuss the cost of the acquisitions.

The 20 MSP itself has been profitable since it was founded, he said.

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 its group as potential acquisition targets and then acquires them. Of the 19 acquired so far, Conkle said, the owners of 18 of them are still with The 20 MSP, with only one leaving just because the husband and wife team were planning on retiring anyway.

Conkle said The 20 MSP is still looking to expand to new areas, including in the Los Angeles market, and expects to unveil a few more MSP acquisitions in the coming couple of months.

“It’s what our platform was built to do,” he said. “It was bring in MSPs, line them up, help them grow, and maybe acquire. We don’t have to go hunt and find MSPs we don’t know anything about. We have a lot in the pipeline.”

Conkle said he recently talked with a private equity firm that called The 20 MSP a “platform MSP.”

“And I said, ‘Well, give me your definition of platform,’” he said. “They’re like, ‘Well, you know, that’s where we buy an anchor MSP, and then we build out from it.’ And I’m thinking, ‘Platforms? It sounds like you’re buying something and expanding it.’ In my mind, our ‘platform’ is a self-perpetuating engine that runs. You turn the key over and it just runs. But The 20 is the first time anything like this has ever been built, especially in this space.”

The MSP Group really is a growth engine for the MSPs that join, Conkle said.

“One MSP we bought last month, when they first came to The 20 Group was about $700,000 in revenue,” he said. “Three years later, when I acquired them, they were at $5.5 million. So we know that the pieces work. If the people put the work in and get in the beginning of the stack and go through it, it works.”

The 20 MSP probably gets five to 10 emails a week from someone looking to buy an MSP, Conkle said.

“And how do they do it?” he said. “Well, send emails to everybody with no earthly idea who they are or what they are. Whether they’re worth buying, they don’t know. It’s like casting a net, and they’re going to get dolphins, sharks, everything, but all they really want is to cherry-pick the cod and throw everything else back after they’ve pretty much destroyed it in some way.”

There are serious offers being made for The 20 MSP, which Conkle said makes sense given the interest in consolidating the fragmented MSP business.

“I think that if I was an actual PE [private equity] firm, and I was out there thinking, ‘OK, we’re going to get into the MSP space, The 20 is the best thing to buy,’” he said. “We’re in this space, but we have this self-perpetuating animal that we just keep growing, putting more money into it. The more you roll up, the more you make. I don’t see an end point to that in the near future, at least. This industry is still so splintered that there’s tons of consolidation that’s to be done. Tons. I mean, it’s unbelievable how much is out there. So there’s a lot of lot of upside for a lot of players. It just depends on how you want to get there.”