For the fourth time in recent days, a managed services provider has been acquired. And this appears to be the biggest deal yet: Konica Minolta Business Solutions U.S.A. has acquired All Covered, a national IT service provider with 350 employees. The deal, completed in December 2010, was announced today. Here are the details, including insights from All Covered President Todd Croteau and Konica Minolta COO Rick Taylor. Plus, thoughts on how Konica Minolta will attempt to balance is channel partner program and All Covered ownership.
Let’s cover the nuts and bolts first – then MSPmentor’s speculation and perspectives. According to a prepared statement:
“The All Covered acquisition will build upon Konica Minolta’s current Managed IT Services offerings and allow Konica Minolta to extend the reach of solutions and services it can offer its customers. As a result, customers will be able to count on a single source for a broad range of products and services – ranging from industry-leading MFP products, comprehensive workflow solutions to Optimized Print Services and Managed IT Services, all while delivering exceptional value and support.”
Executive Interviews
All Covered has 22 offices across the United States. Konica Minolta plans to run All Covered as an independent business and All Covered will retain its brand. All Covered’s 350 employees will be retained, and Croteau will run the business unit. “We’ll be a subsidiary; we’ll keep the All Covered brand and logo,” said Croteau during a phone call with MSPmentor today. “This is not a consolidation play. All employees are coming over.”
Konica Minolta acquired All Covered as part of an ongoing strategy to “make the transition from a hardware-oriented model to to a services model,” added Taylor. “We identified All Covered as our number one [potential acquisition] target over the summer [of 2010].”
Taylor sees opportunities to push deeper into the legal, education, and health care verticals. Konica Minolta claims to serve 100,000 U.S. businesses directly, and 100,000 through the channel. “That’s 200,000 potential clients for All Covered to reach,” asserted Croteau.
The Plan: Buy More MSPs and VARs
Moreover, All Covered will maintain its strategy to acquire more regional VARs and MSPs. In 2010, Croteau had stated that All Covered hoped to acquire as many as 50 solutions providers over the next few years.
To get a better feel for Croteau’s vision check out this FastChat Video, recorded in September 2010:
Original Investors Exit
Still, Croteau’s expansion plans may have been too lofty for All Covered’s original investors. In recent weeks, MSPmentor had heard rumors that All Covered’s investors wanted to exit the company because growth was proving more difficult than originally expected.
During today’s phone interview, Croteau dismissed the rumors but confirmed All Covered would have needed to raise more money to maintain its aggressive M&A strategy.”We’ve had a great group of investors since 2000,” said Croteau. “They put an awful lot of money into the company 10 years ago. We weren’t going out of business or cash poor, but to get to the next level we would have had to raise more capital. This was the best solution. We had multiple suitors, and we decided on this type of play mid-year [2010].”
Added Konica Minolta’s Taylor: “We’re not disclosing the purchase price but I will say All Covered produces profits and cash flow. Now, we’re going to invest to grow. We’ve got a recipe for success. This wasn’t a fire sale.”
Looking ahead, Croteau expects All Covered to make “even more [acquisitions], even faster.”
Channel Conflict?
Meanwhile, Konica Minolta will need to work hard to avoid channel conflict — especially as Konica Minolta channel partners potentially run into All Covered representatives across the U.S. “Managing channel conflict is what I do every day,” said Taylor. “Todd reports directly to me as does most of the services organization. We’ve built a reputation in this business for handling [the channel] fairly.”
Industry Consolidation
This is the fourth noteworthy MSP-related acquisition announced this week. The other deals included:
- mindSHIFT acquiring Alpheon, the health care-focused MSP
- Printelligent acquiring DirectPointe’s managed print services business
- Fully Managed acquiring HIT Business Solutions as part of a Canadian expansion plan
So much for a quiet year on the M&A front.
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Posted In: Acquisitions | Mergers & Acquisions | MSP Mergers and Acquisitions | North America
Tags: All Covered | Alpheon | DirectPoint | Fully Managed | HIT Business Solutions | Konica Minolta Acquires All Covered | Konica Minolta Business Solutions | Konica Minolta Buys All Covered | Managed Services Acquisition | Managed Services Merger | mindSHIFT | MSP Acquisition | MSP Merger | Printelligent | Rick Taylor | Todd Croteau
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Take a look at our 
It seems like an obvious move for Konica if that is their strategy to move from hardware to blended model….I am hopeful that All Covered is able to maintain it’s culture and continue to grow without being impeded by Konica…here’s one….is All Covered going to have to convert print services of their customers to Konica printers? Who wins on that one?
Jim: Great question re: All Covered potentially having to promote Konica printers. I didn’t ask it during today’s interviews (sorry about that). No doubt, Konica sees managed print services as a big opportunity in this deal.
-jp
Interesting – now their service can go from bad to worse. Guess the all-covered investor finally get to see some cash and the 10M napa valley mansion!
Fharris: All reader comments are welcome but we push for readers to disclose their identities.
-jp
Joe –
There is an interesting quote in the post that to continue to grow it required more money and the original investors wanted to get their cash out. Seems like that’s a reoccurring theme in our industry where to grow you have to spend money and then if you’re successful you can’t necessarily take the cash out of the business because you need the cash flow for future growth. It’s an ongoing challenge and the constant innovation in our business requires cash.
All Covered was a big time acquirer, I’m curious how all those acquisitions rolled up together and how the return on investment was for putting everything together. Wonder if there was a significant pay off when you factor in the acquisition and integration costs of all the deals they did.
At Compuquip, we’ve looked at several acquisitions but the price tag always seemed to be a bit too rich for us and we tend to fall back on just focusing on organic growth. We’ll have to see long term whether we were right or wrong but for now we’ve been happy with the results of our decisions.
Eric
COO @Compuquip
Eric: Thanks for your perspectives. I want to be careful not to suggest All Covered’s original investors wanted to get out. It might have been more of a situation where they didn’t want to pump more money in. Hence, the decision to find a buyer like Konica that was willing to (A) pay for the company and then (B) invest even more for future M&A.
I think the channel teaches us there can be multiple paths to success. You may thrive with organic growth, All Covered may succeed with its roll-up strategy.
Either way we look forward to documenting the news and trends. Thanks for reading and sharing your views, Eric.
-jp
Wow! This is very interesting to see where this one goes.
How much could a 20MM year operation contribute to Minolta’s target growth. This seems likely to be in reaction to Richoh’s entry several years ago into this same arena….
Joe,
Did Todd hit his two acquisitions target by the end of “this year”? I think that will reveal how big or how real a goal of 50 in 3 is..
Richard: I concede… I’ve lost track of the acquisition count. But Todd is speaking about making more acquisitions so I’ll pose that question to him next time we talk. Thanks.
-jp
All Covered would have been successful if they value their employees. All Covered focused more on profit without the interest of their clients. I hope that Konica will value their employees when they take over otherwise the ship will continue to sink and they will regret it.
From the PR at All Covered I find the following acquisitions. Perhaps they have made purchases that they want to hold private, but the list I’ve developed from their press is:
===============
10/22/10 == Alteritech Washington DC
7/26/10 == ANALYSYS Baltimore
5/14/10 == IT Pros San Diego
4/5/10 == MyrtleTech Atlanta
3/17/10 == Escape Key Twin Cities
2/26/10 == MainBrain Maryland
10/1/09 == Enterpise Systems Denver
8/3/09 == Imago Dei
6/1/09 == Keytech
6/1/09 == Wildcat Technology Solutions
10/1/08 == NetCor
9/1/08 == Intekrity
3/18/08 == Octopus Networking