Texas-Based The 20 MSP Eyes More Deals After Two Acquisitions

‘With both of these companies, owners kept skin in the game,’ The 20 MSP CEO Tim Conkle says. “We like to see this because, really, what I’m trying to do, my ultimate goal, is to create 500 multi-millionaires. That’s really what I’m trying to do. And I’m trying to do it with MSPs to where, instead of selling down at the bottom of the box, we sell at the top of the box. Because we’re better together than we would ever be separately. We‘re worth more together than we are separately.’

The 20 MSP, a managed service provider that also provides tools for other MSPs to run their business, last week unveiled its first two acquisitions for 2023, with promises of up to another 20 deals lined up.

The next 20 acquisitions could happen by July or August, said Tim Conkle, CEO of the Plano, Texas-based MSP.

“And we’ll have another block that we’ll start working on then. … It never stops. I mean, it’s a machine that just keeps on grinding.”

[Related: The 20’s MSP M&A Spree: Six In A Month, Dozens More To Come]

That “machine” to which Conkle referred is The 20 MSP’s business model, which has two parts. The first is a group of member MSPs who sign on with The 20 MSP to use the company’s tools and operating procedures to run their own business separately.

“It’s a bunch of IT companies that come together,” he said. “We scale together, we use the same tools, we standardize, we use same sales process. We use a unified help desk that’s only available to us. We’re all US-based. That’s the group. The first place other MSPs come into The 20 MSP is the group.”

The second piece is The 20 MSP’s acquisition model, which identifies MSPs within its group as potential acquisition targets, Conkle said. The 20 MSP has since September 2022 acquired 16 MSPs, he said.

“The strategy for an MSP out there is, ‘Hey, I’m having trouble growing. I’m having trouble scaling. I can’t hire people fast enough, etc.’ They come into the group to augment their team and get a national footprint. I think any company that’s $5 million or less in annual revenue would be foolish not to look at The 20 MSP as a strategy to get to their next level and all the stuff that goes with it.”

MSPs don’t come into The 20 MSP group planning to sell in six months, but instead come for help with the three pillars of lead generation, sales support and scale.

“It would be one of those three reasons,” he said. “’Nobody’s calling me?’ Or, ‘I get plenty of leads, but I can’t sell them?’ So they need help there. Or it could be, ‘Man, we’re getting lots of leads. We’re getting lots of sales. We can’t keep up with the labor side of this.’ MSPs have to have all the pieces. With us, not only do you get the pieces, but you get the strategy and all the other stuff behind it.”

Conkle said to think of it as a recipe.

“It’s kind of like thinking you’re going to make a chocolate cake,” he said. “You walk in the store and just start buying stuff. You’re not going to get chocolate. It’s much better just to go to Betty Crocker. Get the icing and to get the box and two eggs, a quarter-cup of grease, and stir. You’ve got good chocolate cake. OK, so now we’re Betty Crocker.”

Last week, The 20 MSP acquired two more MSPs from its group, both of which were acquired primarily to add scale.

The first is Addison, Texas-based Dallas Network Services, which Conkle said is a good company with a lot of customer endpoints that will be integrated into The MSP 20’s Dallas office.

The second is Integrated Business Technologies, an MSP focused on customers primarily in the Oklahoma cities of Tulsa and Oklahoma City. That acquisition gives The 20 MSP its first Oklahoma footprint, he said. The MSP plans to acquire another Oklahoma-based MSP in March, he said.

Every acquisition candidate for The 20 MSP must be a member of the company’s MSP group for at least six months and show minimum annual revenue of at least $1 million, Conkle said, with the majority bringing $2 million to $7 million in top-line revenue.

“Once they’ve been a 20 member for six months, they’re eligible,” he said. “There’s two strategies behind it. One is strategic: Do they have something and a market that really moves the needle? The second, they need to be over $1 million. Revenue has to be able to be $1 million, otherwise they’re too risky to buy.”

While some acquisitions add to the scale of The 20 MSP, a few add strategic offerings that can improve the company’s overall technical capabilities. One acquisition, for instance, Conkle said, brought in a fully automated way to on-board very small-business customers, unlike The 20 MSP, which before had to turn away those type of customers.

“They had created a completely automated way of dealing with one to two-person businesses,” he said. “So now instead of just turning them away, which means they’re gone, we now will capture them in another funnel, do their service for them, but then we watch them for an upsell. The problem with one- and two-person companies is, you don’t where the hell they’re going. I‘ve got a customer right now that started with four people. It’s over 300 now. But if I told him no in the beginning, it would have been over.”

In another example, Conkle said his company historically has given customers web design services for free.

“Why?” he said. “Because we couldn’t figure out how to do it in a monthly recurring revenue situation. In other words, for a monthly fee that just feeds itself. Now instead of giving it away, we’re going to capture that revenue.”

The 20 MSP is successful in terms of the volume of acquisitions it closes in large part because it can keep the total cost of an acquisition under $25,000 as opposed to the more typical $100,000, Conkle said.

“So now, not only does the owner get bought, but now all of a sudden, he saves all the money from the buy side and doesn’t pay a broker, so he keeps it in his pocket,” he said.

Those who sell their businesses to The 20 MSP, including now Dallas Network Services and Integrated Business Technologies, typically keep some equity in the overall company, Conkle said.

“With both of these companies, owners kept skin in the game,” he said. “We like to see this because, really, what I’m trying to do, my ultimate goal, is to create 500 multi-millionaires. That’s really what I’m trying to do. And I’m trying to do it with MSPs to where, instead of selling down at the bottom of the box, we sell at the top of the box. Because we’re better together than we would ever be separately. We’re worth more together than we are separately. And so this is an exercise in bringing us all together. And we all end up better off at the end.”