Sparxent, a start-up company based in Salt Lake City, Utah, is seeking to acquire managed service providers and VARs that generate roughly $5 million to $20 million in annual revenues.
The company, backed by vSpring Capital, today disclosed that it has acquired NetworkD Corp. of Newport Beach, California. Sparxent has also signed a letter of intent to acquire Arbyte of Moscow.
The VAR Guy spoke with Sparxent co-founder David R. Taylor to learn more about the company’s ongoing acquisition strategy. Here are some highlights from the conversation.
- War Chest: During its initial round of acquisitions, Sparxent plans to acquire companies with combined revenues of about $100 million to $120 million.
- Experience: Taylor is a former general and channel executive at LANDesk. Co-founder Steve DeWindt is the former director of worldwide reseller sales at Intel.
- Strategy: Sparxent wants to acquire multiple MSPs and VARs, and become an IBM Global Services or EDS of sorts for the midmarket.
- Learning From History: The VAR Guy openly wondered if Sparxent’s strategy was similar to the old USWeb, which acquired a bunch of Web design and integrator shops but collapsed during the dot-com implosion. Taylor recalls the lesson of USWeb, and says the Sparxent acquisitions will have minimal overlap in terms of technology focus, business focus and geography.
- Don’t Expect to Cash Out: VARs and MSPs looking to make a fast buck aren’t of much interest to Sparxent. Instead, Sparxent is seeking to acquire companies whose management teams want to remain on-board in executive positions. Also, the acquisitions involve some cash but also heavy equity incentives tied to Sparxent’s performance.
- Back-end Systems: Sparxent won’t be a pure integrator. Rather, acquired companies will plug into some sort of back-end Sparxent system — perhaps a managed services or SaaS system. Details sound like they’re still pending.
- Next moves: More acquisitions coming. Stay tuned.
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Posted In: Mergers and Acquisitions
Tags: Arbyte | M&As | Managed Service Provider | Managed Services | Mergers and Acquisitions | MSP | NetworkD | SaaS | softtware as a service | Sparxent | vSpring Capital
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This is interesting news, is this the same company you mentioned last week?
Any MSP thinking of selling to Sparxent needs to look back in history at all the roll-ups during 1999-2003. Almost all of them were unsuccessful. The idea of rolling up companies is strictly an investor play. It’s never in the best interest of the entrepreneur.
Ask yourself…
Do you enjoy making your own decisions?
Do you want to become a manager with only a small say in the direction of the company?
Do you respect and enjoy working with your employees?
Do you respect and enjoy working with your customers?
If the value proposition from Sparxent is ‘We can get you away from all of that stuff you don’t want to do,’ then why did you become an entrepreneur to begin with?
If you feel being an entrepreneur was a mistake and you want out, then trust me take only cash. All the promises of future value, rapid growth, bigger customer base, larger markets and the rest of it is just a pipe dream that will likely never come true.
I sold my 100 employee in 1999 to a public traded company and we were one of 8 companies purchased in a roll up. We were promised so many wonderful things and I made the mistake of taking a lot of stock and very little cash. It was a complete disaster for myself, employees and our customers. I will always regret that decision.
Charles
Charles: I’ve got mixed feedback on this one. The USWeb roll-up and MarchFirst launches were disasters during the dot-com boom/bust.
And as media entrepreneurs, my business partner and I enjoy making fast, informed decisions that don’t get bogged down in endless debate. We’re creative but business minded — two key traits, I think, for building an independent business.
But at some point for many MSPs, there comes a need for outside funding to take a company to “the next level.” Or, it’s nice to connect with additional smart folks who share a common vision or goal.
My dad, a real estate guy, always says: “Everything is for sale, it’s just about establishing the price.”
Should MSPs sell out? Certainly the answer will vary from company to company.
Lane: Yes, same company. Sorry I wasn’t clearer about that.
Thanks Joe, and for the record, I am not one of those MSPs clamoring for information about this company so I can sell mine to them.
Joe: your dad is so right…and real estate is a good teacher of that adage…. I think your point about some MSPs wanting to take their practices to the next level or making a connection with which they’re comfortable are good points. That being said, I, for one, am having too much fun (somewhere in there with all the stress) owning my own shop (well…my partner Deb and I) and the freedom that comes with it.
And then, there’s the fond memory of the MarchFirst launch. I had some good friends that got really burned, which makes me view all of these roll-up type efforts with a healthy view of skepticism….
Jim Van
http://www.logicomm-inc.com
Jim: The folks at Sparxent know the horror stories from MarchFirst and USWeb. I suspect the challenge for Sparxent will be more global in nature — dealing with different cultures and localization issues as they acquire companies from multiple regions. On paper, though, I’m impressed with the first two acquisition targets. They seem to have strong track records.