Transcript
from those who have gone through or are going through the process in top M&A and business minds to help you maximize the value of your MSP, whether you're buying, selling, or just trying to improve your business. Make sure to subscribe to the Kaseya YouTube channel so that you know when new episodes drop, and you can even save the M&A Unpacked playlist for easy access. So today I'm joined by Neil Medwed, who is the Vice President of Corporate Development and M&A at Meriplex. Neil, thank you for being here. You know, it's a pleasure. It's a pleasure. I love sharing my knowledge and expertise with others, and it's a blessing that I'm on here right now. So thank you. Awesome. So let's dive right in. You've been in the MSP space for a very long time, 40 years. I hate to tell people how long I've been working, so I feel bad doing it to you. But starting back in 83, can you share with us a bit more about your journey from founding Preferred Technology Solutions to kind of becoming Meriplex's M&A guru? You know, it's interesting. Number one is I'm an older man, and I embrace it. I made it this far. I'm blessed in so many ways, and, you know, with age comes wisdom. And that's why I'm here, to share with you, share with the audience. And you know, I got into computers, think back to 1983. You know, the original IBM PC was out, floppy disks and very, very small hard drives, if any, you know, RAM 16K. And I was blessed to get into this industry. And you know, one thing I love about the technology industry is it changes every day, every week, every month. You can't get bored. You have to be a sponge and really understanding the knowledge. But I got into computers, you know, way, way back then, embraced the technology, always understood what it's like for people who didn't understand technology. You know, the first time I sat in front of a PC, I thought if I hit the wrong button, it'd explode. And, you know, understanding that and being able to alleviate the fears of others really helped me along. But I got into the industry. I formed Preferred Technology Solutions in 1994. It was, you know, my wife and I are one of the interesting couples that can live together, sleep together, work together, not kill each other. And we opened up Preferred Technology Solutions on our kitchen table and grew it into a very good company. Had it for 26 and a half years, of course, it was a bar at first, then became an MSP. And as I, as you know, I aged, as my life changed, you know, you always have to have an exit strategy. You know, that's been told by business experts everywhere. You know, if you open up a business, you should have some kind of exit strategy at some point. So just like, you know, meeting the love of your life, you know, usually it's not when you expect it, it's when you least expect it. So M&A in many ways is the same thing. I wasn't looking to be acquired by Meriplex, but I just happened to get a call from my best technology friend that said, hey, you know, would you speak to our CEO? And I said, you know, that's how I became Meriplex. But most importantly is the journey, the MSP journey. And I like to speak at conferences on a couple of different things, you know, number one is mergers and acquisitions, obviously, I'm one of the names in the industry is the best way to put it. You know, the second thing is, if I knew then, what I know now, how I run my business differently, you know, going from owning your own company, to someone who looks at many, many, many companies on a monthly, yearly basis. I've learned so much, I can say I've learned more in the last four years doing what I'm doing now, than I had decades before. And those are things that I think I can really share with you on this episode here. If I knew then, what I know now, how I run my business, you know, differently, many of us are lifestyle businesses, you know, as you're younger, you know, we're trying to build some kind of empire. It could be a small empire, it could be a large empire. As you get older, many of us, we go to we're wanting to live life a little bit more. And we're wanting to, we're wanting to earn good money, but not push ourselves as hard as we did in the empire stage. No matter which stage you're at, the empire building stage, or more of a lifestyle business stage, you can still be doing things in your business to make sure you're as profitable as you can be, that your employees and customers are well taken care of. And your future is as bright, not just for you and your family, but for your employees, the team that got you there. You know, things like managing by data. An example I like to use is, you know, your head engineer walks into your office and says, hey, we need more engineering. And many of us say, no, okay. You know, they all look busy versus, okay, show me the data. You know, what's our engineering utilization? You know, what are we really doing? Are we using tools effectively? You know, things like that to become as profitable as you can. And take those profits, use them to pay your team more, to invest in the tools. And guess what? To make your business more profitable, so it's flowing more cash, it's a for-profit business. There's so many things we can be doing differently. With me, again, I had my business 26 and a half years. I could have prepared better for M&A than I did initially. I could have load a lot more cash. I was probably 15% more employees than I needed to have, maybe 20% more, you know, for the workload that I had. And just think how that can affect the profitability of the company. We're talking about multiples when you're talking about M&A. Everything that you do should be well thought out. And that's a big difference between smaller companies many times and larger organizations like Meriplex. You know, one thing I learned in the journey is, you know, we went from, and we'll talk about that a little bit later, but from about 80 people after they acquired Preferred Technology Solutions, my company, to about 700 today. And how a larger company thinks is many times different than how a smaller organization thinks. And we should certainly, you know, go into that some. And the journey, it's been a great journey, my friend. I consider myself blessed in so many ways. Number one, blessed that we're in the industry that we're in. We help people. We help secure organizations. We help organizations become more efficient, more effective. And we help the economy by supporting these organizations better than they could most times internally. Thank you for sharing that. Very interesting journey. Now, you've gone from selling your own MSP to becoming an active acquirer of MSPs. So, and you said, I think you said 11 acquisitions under your belt for Meriplex. That is. That's correct. Right. So tell me about the key elements that you look for in a company to determine if it's a good fit for acquisition. Sure. You know, I'm going to start off by talking about different chapters of M&A. You know, many organizations, when we're smaller, you know, we look for different types of targets than you look at, we look at today. But as a generalization, you know, what we want, what any acquirer wants is an organization. I shouldn't say any acquirer, most acquirers, but we're talking about a couple of different models. Organizations like Meriplex, what they're looking for is strong revenues, strong profitability, a strong team within the organization, and growing revenues and profitabilities. You know, at Meriplex, what we look for is, for the most part, we want the ownership that wants to do something much, much bigger and better than they could otherwise. We want a team that wants to continue growing, but growing in a different way, growing as part of something as much, much bigger and better. There are other organizations that like the more unsuccessful companies. That's a different business model in M&A. The thought process there is, let's take a unsuccessful company, and using our knowledge, our expertise, you know, we can turn that around, you know, pay much lower multiples for that. We can turn that around and make it much, much better. If you think of our industry, it was either normally a salesperson said, I can do it better, and opened up their company, or it was an engineer that said, hey, I can do it better, and opened up, you know, their company. Pretty rarely was it someone with a deep, deep financial acumen. Harvard MBAs don't say, hey, let me open up an MSP. That's the fact of the matter. So for Meriplex, and many of the people I sit on panels with and speak with, we're looking for successful organizations, because we want to build on that success. There are others that come to me and say, hey, Neil, if you find companies that aren't doing well, that are, you know, underperforming, that don't have the management, don't have the expertise and the knowledge, you know, and they're breaking even or losing money even, that's a perfect company for us, because we can pay very little, and we can use our expertise and turn it around. Again, for Meriplex, it's about the better organizations. The larger you get, you know. I know all my, you know, we're all friends in our industry doing what I'm doing for the most part. It's a very, very friendly competition. For Meriplex, we're looking for the bigger companies, because of the size, you know, we are. Revenue growth, everything else, you know, a small MSP really is not going to fit our model. When I look at things, I look at things in a couple different ways. I look at geography, as many of my other, you know, other people, some panels with me do, where we are, where we aren't, but also look at core solutions, you know, what solutions does that organization have, what verticals does that organization have that can layer over the Meriplex nation and make it a nationwide practice versus just a local practice, if you will. Again, for Meriplex, it's, do you want to do something much, much bigger and better than you can? Do you want to be with a group of high-level talent? You know, that's for me, you know, going back to my journey real quick, you know, I'm in Dallas-Fort Worth, you know, one of the fastest-growing metropolitan areas year in, year out. I'd go to business meetings, I'd go to charity events, I'd sit at the speakers' tables, and I'd have conversations, great conversations with the movers and shakers of Dallas-Fort Worth business. And I knew I wasn't big enough to truly support them. And as importantly, if not more importantly, they knew that I wasn't big enough to truly support them and to, for them to feel comfortable introducing me to their IT directors or chief information officers, their chief security officers, you know, people like that. And that was one of the main reasons, you know, why I joined Meriplex. I want to do something much, much bigger and better than I could have. Many of us are in the lifestyle business. You get up in the morning, you shower, you shave, you go to the office, you win some, you lose some, you go home, you maybe have a drink, whatever, you watch some TV, go to bed and rinse and repeat. And for me, personally, I was getting bored. I was making good money, but I was truly, you know, getting bored. I want to do something much, much bigger and better for my last chapters of my life. And joining Meriplex allowed me to do that. When I came into Meriplex, I did not know I was going to be an M&A person. I was supposed to go to the business dinners, the charity events, talk to people in the same situation, and then hand it off to other salespeople to work their relationship. You know, me being a high-end relationship person, but another salesperson working it, you know, closing it, if you will, then just go to other networking events. And what happened was I called a buddy of mine who owned a, I've always been big in the technology community. And, you know, I called up a buddy of mine in Dallas, had dinner with him, talked to Meriplex store, which we're building, growing, doing. Next thing you know, he became part of Meriplex. I got a call from a friend of mine, owned a company in Southern California about doing some work in Dallas. Same thing happened. You know, all of a sudden, they became Meriplex after hearing my story and our story. And our leadership said, Neil, how are you doing this? I was like, well, I know a lot of people, I'm highly respected. You know, I've been in communities for a long, long time in leadership, and people trust in me. They know I'm very, very blunt in what I say, and I never lie. My father taught me when I was young, if you never lie, you never have to remember what you said. And they said, guess what, Neil, you know, voila, you are an M&A person. And I became, you know, highly respected in our industry, not just, you know, because of the 11 companies that I bought in above three-year period and many, many more to come, you know, especially as we move forward, but because my life goal is to share my knowledge with others. You know, I truly believe that the dash between life and death is how many people you positively impact in this world. In my role as Meriplex's M&A, I've been called a guru before, but called other positive things. When someone becomes Meriplex, from the shareholder perspective, they become very wealthy. For the customers, the solutions and support and talent we can bring to their table is extremely good. But as importantly for the employees, maybe, yeah, as importantly as a customer side for sure, but not, you know, less importantly than a financial side on, you know, the shareholders, but for the employees, the teammates that got you to where you're going, there's no more glass ceiling, if you will. When you're with a growing organization like Meriplex, to the employees, you know, they can move up to different levels of management. They can move geography wise, because we're one Meriplex, we're fully integrated versus non-integrated companies that, okay, you keep your brand, things like that. You know, there's a place for them all, you know, the different types of M&A and I'd love to be able to get into that different types of M&A, but, you know, there's a place for all types of thought processes and desires. So, most important thing is keep your customers in mind, is it good for your customers? Number two, is it good for your employees? If it has to check those two marks, then number three is the financial side of it for you. If it doesn't do the first two, forget about the third, but it's not going to be the right fit. Okay. So, knowing that, you know, you're talking, obviously you're not necessarily just going to go for the highest price, but you want to, you talked a lot about ensuring that it's a good deal for your customers and employees. What advice do you have for MSP owners to ensure that they align with the right buyer and keep their company culture intact during and after an acquisition? Sure. You know, number one is really understand what the acquirer is trying to achieve from a 10,000 foot view, and then really go down to the ground level of that. You know, there are certain organizations that are simply trying to buy organizations at lower prices, at lower multiples, and then because, you know, the minute that the ink dries, the enterprise value, you know, goes up considerably because a multiple of a large organization is usually going to be more than a multiple of a smaller organization. Understand, again, from the top level, you know, what they're trying to achieve. Understand the backing of the organizations, you know, the certain organizations are self-funded, which is magnificent. Others are private equity backed, which is magnificent. What I found, there's been a lot of private equity money that's come into our industry because of the reoccurring revenue side of the business. They look at the MSP world contracted companies, you know, contracted with your customer companies, and again, they can invest in an organization like an MSP and bring back quality returns, you know, for their shareholders. Many times, the executives of a certain size platform, let's call it a platform company, but that's a word most people use when private equity comes in, buys an organization to partner with it. What gets you from here to here doesn't always get you from here to here, talent-wise. And while there's many executives that are good to get it from here to here, they may not be the right executive to get it from here to here. So, you know, back to understanding the organization, what they're trying to achieve, understanding the executive team, not just individual, but executive team, you know, what levels and layers of management they have. Culture is very, very important. You know, when you talk about culture, you know, it means different things to different people. I call it the culture of success, you know. When you're a smaller organization, you may be in a situation where you don't hold your employees as accountable as necessary, back to if I knew then what I know now, you know, for reporting, for managing time, for managing the sales process, formalizing the sales process, things like that. When you're in larger organizations, sales process is probably going to be more formalized. Time tracking is going to be more formalized. You know, things are going to be somewhat more rigid in a larger organization because it's going to be performance-based. When we're talking culture, look at improving, you know, understanding where your culture is today, are there areas of improvement? What are you going to be looking at from a, you know, if you become part of Merriplex, eventually that things are going to become performance-based. You know, things are going to be more formalized as far as engineers, ticketing, tracking time, the sales people. If you're anything like I was back when I was preferred technology solutions, I did have sales people that were underperforming. There was always that big thing that was coming at the end. Oh, we're just like a month away, three months away, but the monthly to monthly performance simply wasn't there. And moves should have been made if I was a stricter business person, in essence. And, you know, performance is in most industries, you know, truly, you know, what it's about. So, you know, culture is extremely important, but my thing is, you know, culture of success. When you look at different MSPs, different platform types of organizations, some organizations are you keep your brand and, you know, we'll do the HR, we'll do the accounting, you know, we'll do certain things as a group. But, you know, think of, you know, preferred technology solutions, a Merriplex company versus the one Merriplex world. You know, we're building a nationwide brand. It's our goal to be the recognized leading brand in SMB and especially mid-market in America. And you can't do that as preferred technology solutions, a Merriplex company. You know, for us, something else for other MSPs, but, you know, for us to look for is how our management is set up. You know, we have nationwide management, you know, we have regions, you know, but they all roll up to the nationwide practice leaders and executive team, you know, which is also something interesting, but I feel much, much better for customers and much, much better for the employees. But it gives so much more upward mobility as well as geographic mobility. If you live in Texas, you want to move to Colorado because you're a big time skier, guess what? You have those abilities. If you live in California, you're sick of taxes, you want to move to Texas or some places more tax friendly, you have, you know, those abilities. You know, so there's all different things to look at, you know, how they're organized, you know, what type of culture. They have a culture of success. Are they going to keep you in your little office, in essence, illogography, or is it a nationwide type of thing, your executive team? You know, where are they going to be placed? And of course, it's also the, I was the big cheese when I was a CEO of Preferred Technology Solutions, all decisions, guess what? I made them. When you're part of a larger organization, you're not, in essence, the sole decision maker. You know, think of things as simple as vendor selection. When you select a vendor, it affects, obviously, finance. It affects operations. You know, can we support it? How do we install it? Things like that. It affects sales. How do we sell it? All these different checks when you're in a large organization. You can't go to a bar and get drunk with someone and come back and say, oh, we're changing, you know, to this or that. You know, there's many, many decision makers, and, you know, it's a village. And decisions, you know, input's brought in from the whole village before decisions are made, which is a great thing. Okay, so as somebody who's seen both sides of the table, you've been a seller, obviously, and a buyer. What do you think are the most common mistakes MSPs make when they start preparing for a potential sale? Number one is have your house in order. You know, there's been many organizations that really don't understand their finances, don't understand their books. And, you know, number one, again, you know, as I said before, you know, in this interview, is from the day you open up a business, there should be an exit strategy in your mind at some point, whether it be a hand down to your family or, you know, for a sale. But make sure your books are in order, your income statement, your balance sheet. You know, the financial side of it should be something dynamic that's improving, underlying three times improving each and every year. How can I delve more data from my business? You know, revenue streams, profitability, cost of doing business, all these, you know, different areas. So, you know, one is make sure your financial side is in order. You know, mistakes. I've seen so many sets of books where the moment I look at them, I know that they're overstaffed. They're not managing by data. You know, I'd like to use this example. I was that way, preferred technology solutions. You know, let's just use $100,000 all in costs for a technical resource. If you're 20%, let's say you have two or three engineers that you truly don't need if you're managing by data. And if you manage by data, and those weren't on your payroll, and the same set of work can be done with existing staff, using that $100,000 number, that could be $300,000 more to your bottom line, which can be utilized for investing in your employees, paying them more, giving them more bonuses, let's just say, you know, buying tools to make you more efficient. And again, putting more to that bottom line. In that example, let's say you took $100,000 and you gave your employees, you know, more benefit. You take $50,000 and invest in more tools to make you more efficient, and take the other $150,000 and put it toward the bottom line, and I'll bet you that $50,000 for tools is going to probably pay for itself in efficiency. But, you know, that's substantial. You know, so understanding your books is number one. You know, managing, you know, by data, a lot, you know, really don't manage effectively by data. You know, other mistakes that MSPs make is they truly don't understand sales and marketing and the differences between the two of them. They don't partner, they don't focus on a set number of partners, you know, as far as vendor partners, manufacturer partners, and they do a shotgun approach instead of really focusing on a certain level of, you know, the chosen ones, and truly go to market together for mutual benefit. You know, they don't look at their tool sets. You know, consider a tool set a fixed cost. This is my cost per seat of doing business. And not to do a Kaseya plug, but it's factual. You know, Kaseya 365, if I can go from, let's say, $12 to $4 or $5 cost per seat, and I have X thousands of seats, you know, that could be substantial in your cost of doing business, which again drives up profitability and all those different things. Mistakes that MSPs make is many times they don't invest in community. I'm a huge community person. You know, going to the events where you can sit with peers shoulder to shoulder, build trusted relationships, and share. You know, the board of directors, peer groups, you know, the true methods, the evolved, you know, the masterminds, the different peer groups that truly put you in a formalized knowledge base. Again, going back to the, we're either a salesman that said, I can do it better, or an engineer that said, hey, I can do it better. Rarely are we have great, great financial acumen. But putting yourself in a situation where you're with people that understand, you know, how you live your life. You know, the seat that you sit in intimately, and it can help you, guide you, and in some ways make you, you know, make the right decision. They don't embrace community the ways that they could. And, you know, number, the next one I have to say, because I live this life, mistakes. Take time for yourself. Forget that, what I just said. Make time for yourself. Recharge the batteries. Something I learned in a peer group was Neil, you know, you seem to be the dishwasher, the busboy, the waiter, the maitre d', you know, the cashier and everything. You know, it's all decisions have to be made by you in the big picture. You've got to scale your business in a way that's not dependent on you. I've seen so many businesses that are dependent on the owner. And if you can get away from that, there's one thing, giving someone a title. There's another thing, which is, which is giving them the ability to make the decisions that the title has. Pointing to their door when an employee comes to you and say, have you talked to that individual with that title before you came to me? Well, no, go, that's their job. If something doesn't happen because of that, then you come to me. But, you know, how do you scale? I've seen so many owner-only sales companies that drives down value. I've seen many organizations that don't have the right talent and the right seats on the bus. And those positions aren't empowered, which again drives down value. So those are other mistakes that I see made. You know, one thing I want to say, you know, Mike, you know, to you in the audience, I love sharing with people. You know, I'm an old man, you know, I'm a downside of my career. I just won the Lifetime Achievement Award through Channel Partners and Forma two weeks ago, which I'm, which is a surprise, but I feel very blessed. That's about, I've won awards before, but that's, you know, that's something that's your, that's your lifetime achievement, you know, scenario. And for me, what makes my toes tingle and my heart beat is how can I help others succeed? So never hesitate to reach out to me via LinkedIn, email, whatever, and ask questions. I don't care if you're a five-person MSP or 500-person MSP, if I can help you, I certainly want to. Yeah. And you beat me to it. So that's, that's always my final question. May as well do that right now is what is your email address? And I'll make sure to put that in the show notes and with your LinkedIn contact info. Yeah. My email address is first initial, last name, N Medwed, M-E-D-W-E-D at meriplex.com, M-E-R-I-P-L-E-X.com. Obviously I'm on LinkedIn, please, you know, hook up to me with LinkedIn, you know, again, back to it. You know, if I can help you, if I can help the audience in any way, if I can answer questions, I love, I'm on stage quite often at different conferences, you know, sharing. I keep on getting asked, I guess I'm doing a good job of it. You know, if I can help the audience in any way, you know, become a target, you know, to someone like Meriplex or someone else. If you're not a target for Meriplex, I probably know others that you may be a target, you know, for, you know, if I can help you build your organization in a better way, guess what? You know, my mitzvah, you know, my goal of helping other people, it helps your customers, it helps your employees, and it helps you. I'm achieving that goal between life and death, help as many people as I possibly can. So please reach out to me, make the time, work on your business. Love it. It's great. This is an awesome interview. Really appreciate it. I could talk to you all day. So let's wrap up with this. You guys have grown. I mean, you've had some dramatic growth from 80 to over 700 employees. That makes Meriplex a very large MSP and you've mentioned plans for further expansion. So tell us, you know, give us, who should reach out to you right now? Well, I mean, I'd answer that in two ways. Who should reach out to me? Your whole audience. You know, number one, because again, I want to help you, the audience members, you know, build and grow, avoid mistakes, enhance successes. You know, from an M&A, again, we're one of the larger MSPs in the nation and we're looking for very successful companies with, you know, I'd say use $10 million in revenues as a, you know, there's always play in this. But, you know, $10 million revenue and up, you know, you're going to see Meriplex acquiring larger and larger organizations, successful organizations. You're going to see, you know, Meriplex acquiring platform companies, you know, platform companies being organizations that have bought in M&A, you know, previously. If you're an organization that has a very strong vertical, again, me looking at things geography wise, where we are and where we are, but as importantly, what can I put over the Meriplex nation and roll out a vertical from a national scale? So if you're a small organization, but you have a great vertical, then, you know, certainly reach out to me so I can evaluate you. You know, I put things in a couple different buckets, if you will, more than a couple, but a couple main ones. Organizations that I would love to become part of Meriplex nation, again, largest, you know, larger, more successful organizations that are doing very well, their revenues are growing. You know, they have a great team of talent within their organization, want to do something much, much bigger and better than they could otherwise. And then the other bucket is organizations that would love to build, help build so they could become a target, you know, for Meriplex one day, kind of like a farm system or baseball or whatever. You know, where are they, triple A, double A, single A, you know, how can I move them up, you know, so they can become, you know, target for Meriplex. So again, verticals, geography, but, you know, if you're a successful organization with strong leadership, wants to do something much, much bigger and better than they could otherwise, ding-a-ling-a-ling, you know, give me a call, whether it be now or a year from now. If you want to prepare for M&A and want someone that's going to be very brutally honest with you on how best to prepare for M&A one day, you know, ding-a-ling-a-ling, you know, give me a call, reach out to me because that's what I love to do is help others succeed. Well, thank you, Neil, for sharing your valuable insights and thank you everybody for watching. Make sure to watch every week, every Monday for new episodes on the Kaseya YouTube channel. And if you're not yet a member of the M&A Concierge platform for MSPs, make sure to apply today. It's an amazing platform and is 100% free for both buyers and sellers. See you next time, everyone. Thank you. Have a great day.
