Transcript
from those who have gone through or going through the process and top M&A business minds to help you get deals done faster and maximize the value of your MSP, whether you're buying, selling, or just trying to improve your business. Today I'm thrilled to have with us Craig Fulton from Evergreen. Craig, welcome to the show. Hey, thanks, Mike. I appreciate you having me on, excited to talk about it. I should also point out that our very first guest on the M&A Unpacked program was Frank DiBenedetto, who is also running the M&A concierge platform for MSPs. And you now happen to own Frank DiBenedetto. So congratulations on owning Frank. Yeah, he got acquired by Evergreen, I think it's been a couple of years now, and that's real exciting business for us. Yeah. No, Frank, he's a great guy. Right. Make sure I give you full permission to boss him around, tell him what to do, make him mop floors, do whatever he's got to do. All right, all right. So Craig, thank you. I'd like to talk about Evergreen, it used to work for some other company, but we're not going to talk about that. Yeah. Yeah. I was in the software side of things. Craig, tell us about Evergreen. Who are you guys? What do you do? Yeah, Evergreen, there's a little bit of a misconception, everybody, oh no, the private equity firm. We're actually a holding company. And that changes things a little bit. You know, when we say holding company, think of it like Berkshire Hathaway. We are inspired by them and Warren Buffett. But Evergreen is the permanent home for businesses and leaders. What we mean there is we buy businesses to hold them forever. We never sell a business. And we are committed to being a decentralized model. So when we acquire companies, we don't change the name, the people, the tool set, tech stack that they use. We keep everything as is because we believe that a business is unique and it's gotten to where it's gotten because of its people and its processes and its customers. And we don't want to disrupt that. We acquire companies and we work with them to help them grow. And it's different. It's attracted me to be here. I have a lot of friends that own MSPs and I thought, man, this is a great option for them. And I'm excited to be with Evergreen to share that story. So Craig, what does that look like for the person, the company, the MSP who's being bought? What's life like after you purchase them? Yeah, I tell people the day of closing is the most exciting kind of uneventful day because it's exciting because look at this big cash reward we're getting for all our hard work. But then it's like, OK, just keep going. You know, there's some accounting stuff we have to do. You know, obviously, we need to understand what's going on in the business. I think the accounting feels it the most, but large part the service team still delivers the same service they've always delivered. Sales out there selling the same goods and services. But we start working with the leadership of the company. There's Lyra Technology Group is a part of Evergreen, and they work with all of our MSPs to help them grow. And there's a series of things that they do, you know, buying power with vendors, helping with talent acquisition, helping ramp up sales teams, just a whole series of financial levers like the column that will pull working with a company to help them grow. And because we're holding companies forever, I just I don't think it has that feeling of that immense pressure, like when you know you're going to turn an investment and it's it becomes more collaborative working with the company. So if I'm an MSP and I have a business, I'm looking to sell it one day, what's what should I be doing? What should I what would I look like if I was going to be attractive to you guys? Yeah. You know, there's a lot of options out there. Right. And I tell people, Evergreen is just one option of many. But I want to make sure everybody knows this options there. I mean, you know, when you're thinking about the value of your business or maybe you're preparing it. Something that's really attractive, having a growth engine. Right. Do you have a sales team? Is this founder led sales? If your business is still founder led sales, my advice would be invest in a salesperson now. Right. Get that salesperson in there. And I get it. That's tough. Selling managed services is not easy. Right. Selling things like here I'll sell to you this month. Here's the thing that tends to be easier to do. We love seeing a business that has a growth engine in place. It's good to have your P&L structure in order as well. Right. Start thinking about what's your breakdown of recurring revenue, reoccurring revenue. There's a difference. Recurring is your typical subscription managed services. You got to kind of understand what that is. Reoccurring is that customer that keeps coming back for professional services, stuff like hardware refreshes, migrations, like that's a reoccurring. And then there's just the one off like customer showed up, needed some help. We did it. That's it. Might see him again. Might not. Right. There's really like three buckets. It makes it real easy for an acquirer to understand the value of a company when it's structured that way. You know, there's there's clean ways to run a business. You know, we always think like, you know, let's just face it, businesses are evaluated on EBITDA. Right. What's the profit coming out of the business? And a lot of times you'll see companies running a lot of things through there. I've got my cars. I've got some maintenance on that. I'm doing this, doing that. I would advise people get that cleaned up, you know, as best you can. I get it. There's a lot of advantages to having a company and doing that and by all means. But, you know, when it comes to time to sell your business, that stuff can make it a little more tricky. So, again, preparing, get a growth engine in place, start to get the books in order, you know, really tighten things up. You know, it's like when you're selling a house, what do people do? Put some fresh paint on this thing, get this yard mowed and do some landscaping. There's things like that, too, that you want to do in your company. Now, you don't have to physically do that in your company, but metaphor, yeah. So I want to go back to something you said, you know, one of having a growth engine. I love that. I've heard that in different ways a lot. That's kind of a recurring theme, making sure that MSPs are growing. And you said one of the, if you don't have a salesperson yet, you should probably go hire one. What's your advice for that MSP? If you were, you know, if I was just your buddy and you were kind of mentoring me to be, to hire my first salesperson, because I've heard horror stories on this and I've heard stories that go on for many, many years where we just can't hire a salesperson. We've got our, we're on our fifth one and it's not working out. What's your suggestion? Yeah. It is hard to make a suggestion on this, but first thing I'd say is just do it. Just like, sometimes it's hard to just do it. Like just hire your first salesperson, put it out there, find someone with the understanding that you're probably going to fire that person within six to nine months. It's just going to happen. I've been in a lot of peer groups and you hear this. It's like a common saying, Hey, you'll probably fire your first salesperson, but you'll learn a lot and you'll do a lot better that second time. Cause look, there's nothing wrong with being founder led sales. The founder is the most passionate person, understands the business. It's a small to medium business world we're in. The customer wants to know who the founder is. Like, Hey, I want to know who we're dealing with. I want to see eye to eye. I want to shake hands. And that ends up happening. But again, I would get out and get that salesperson because any acquirer, not just Evergreen, any acquirer is going to be delighted to see, great, I'm acquiring a business that has a growth engine. I'm not going to have to invest in that and wait for that to come. That does lead to higher valuation when you have that growth engine in place. And something I should point out that's very important here, I may not have touched on it, I should have, is the customer concentration too. You come across a lot of companies that have a lot of revenue relying on one customer. That's very high risk. That can harm evaluation. That could just turn off a buyer. It depends on what the buyer is looking for, and it makes total sense though. I tried to start my own IT business in 2006. I was a typical coming out of eight years with a big enterprise company, I'm going to do my own thing. And I had one customer I was doing work for, and I thought this is going to turn into something. It didn't. But if it would have, I could see, I would have grown up with them. They would have bought more for me, they would have been growing, I'd have been growing, and it happens. But I tell people, get a salesperson to help dilute that down. Get that customer under 10% of your total revenue coming in. So yeah, and this leads back to the advice of the salesperson, you got to get them finding new business. It's the hardest thing to do. I swear, most companies I run into add maybe two new customers a year. It'd be great if you can get more than that. And I know, Craig, that's not easy. Yes, that's the hardest part. That's why you got to make that investment sooner than later. Do you have any tactical advice that you'd give them, like, hey, here's the 10 things you shouldn't do or should do, you know, whatever. If you don't, don't worry about it. Tell me you don't, and I edit it out, but. Yeah, absolutely. Absolutely do. This is firsthand experience, and others I know, when you hire a salesperson in, you got to get them working processes, just like you do your service team, right? Service team, here comes a ticket, you set the status. You do the documentation, you do this close. You have to do the same as salespeople. A lot of salespeople don't want to be confined to systems. Oh, no, don't put a system on me. You're going to kill my magic if I do sales. They need to follow the system too, right? So when you're billing a sales team, whatever PSA or sales tool you're using, HubSpot, CRM, get them also disciplined in using it, right? You can't, here's the thing, I should have touched on this, well, I do now. Sometimes managing a salesperson is just as hard as doing the sales, because it's like, how do I manage this person? Let the system do it, right? Say, hey, you got to get your opportunities in. You got to update the numbers on there. We need to see what the pipeline is. You got to change the stages. You've got to communicate. I think we all know it, sales and service delivery, not the best communicators. They fight like, you know, with sandpaper against each other. It's not smooth. And let the system do it. Let systems do the communication between each other. That's why all of these great MSPs are invested in their tech stack. Use it. That's what I would say there on the tactical side of it. Brilliant. Craig, so one of the things we hear a lot from sellers when they're looking for a buyer is what happens after? You know, it was a surprise to me. I figured, you know, people are looking to sell. They want to know how much money they're going to make. But even more important than money, I keep hearing, is culture. What's going to happen to my employees? What's going to happen to my customers? You guys are a pretty big company, you know, so if you talk about that a little bit, you know, are you guys transactional in the sense that you're just kind of buying a company and we cut and we get rid of it? Tell us about that a bit. Yeah, you use a word I don't like there called transaction. I don't like to use that word because it makes it feel not personal, especially at Evergreen. We like the personal side of things when we're talking to business owners. We want to get to know them. We want to get to know the business. We want to know to get to know the people. We're not just out like looking at Zillow for business listings. We're out there because we know, hey, if we go through with this, it becomes an Evergreen company. We want to preserve that culture and those people. So we should understand what that is to make sure there's a good fit there. And we give full autonomy when we acquire a company. Some owners leave, right, at the deal or they transition out and we place leaders in companies. That is something that we have a lot of success doing or there could be leaders there, but we fully empower them. I've been asked, you know, we do town hall sometimes with companies after we acquire them and the leadership asks, well, we wanted to make this change. Can we still do that? And we're like, yeah, it's your business to run as long as we're hitting all the agreed upon metrics. You do what you need to do there. But again, we work together where you need help, let's help if there's suggestions. But aside from Evergreen, I think that's an important thing when someone's looking to sell, you know, what's the operating model that you're going to be going into? Is it like Evergreen's where it's a hold forever decentralized or is it more of a platform play where there's going to be a roll up? And I think that's what a lot of people think when they think private equity is, oh, yeah, roll up synergies, reduction in force, all of this. There certainly are those out there. There's a wide array of options. I think when you're selling your company, look at all of them, but just know Evergreen's best one. Look, I wouldn't come here if I didn't feel that way, so obviously I'll say it. But yeah, there's a lot of options out there. But I think Evergreen's a good fit because of small business is about the people and the culture. And we're here to preserve that legacy. Yeah, that's interesting. And you guys have have gone global. I mean, you guys are everywhere, right? Yeah. Geez, I look at the calendar. The past six months, we we've we've expanded into London with a company called The Final Step and just recently acquisition of Digital Origin. And then this year we got into Australia and New Zealand. So we made our first acquisition, Lancom in Auckland, then our second one in Australia with Centre Red. We've made some others that are unannounced and we're in due diligence with some. But yeah, I think globally, you know, Evergreen has more than MSPs. We operate in four industries. We've got financial tech. Government services and ERP services and ERP and MSPs. Pretty close operating model. But you know, globally across all of them, we're I think we're over 90 businesses and the MSPs were in the 70s. Now I like I want to I want to caution with this because, you know, I I know some people say, oh, big company, I'm just going to be a number I'm going to get washed out. This is just a transaction, couldn't be more opposite. We are very people focused. It's one of our core values that we believe in that we operate by as people first. We look for bright spots in our people and our companies. You know, we have a lot. We still believe in that. We bring people together. We have regular meetings. We, you know, we promote from within earlier this year. We had a lot of change happen in the way we operate and we promoted a whole group up. Some MSP CEOs got promoted into regional CEOs. So, yeah, it's it's a great place to be, again, a unique way of operating at Evergreen. Interesting, regional CEOs, that's that's interesting. I've never heard that before. Yeah. I know exactly what you're talking about, but right, because when you get that many, you know, and we have to manage the organic growth of our businesses, it's hard for one team to manage that many. So so we've we've created this regional CEO, announced it in January. It's on our site for those who might want to look at it. You know, there's a regional CEO in Canada working with all of the Canadian leadership to help them grow one in the South, one in ANZ, one in the U.K. Right. And we've got these teams just working on growing these businesses, keeping them tight. Making sure we stick to our word of being decentralized as well. Yeah, I love that. And, you know, for me, if I'm thinking, OK, I run a business, I've kind of hit the point where I'm looking to take it to the next level, bringing a company in or coming into a company like Evergreen. It allows me to to almost, you know, sell my business, but also take the next step into a bigger opportunity. So that's neat. There's a lot of opportunity there. Yeah, we're very flexible. We offer a lot of options to sellers. Again, there's an array of things that people do. Again, some leave at closing, you know, because maybe they've been out of the day to day already. Some stick on for a transition. Some have stayed and become regional CEOs. Greg Zolkow is here at Atlas in Tampa. I'm in Clearwater, pointing to Tampa. You know, he's now a regional CEO and we placed a new CEO in his business. And it's a lot of fun. I feel like it's this next evolution of our industry that we're in, that we're shaping. It's a good time. All right. I hate asking this because, you know, there's so many different nuances to this, right? There's so many things you got to do. But like, what's your number one piece of advice for folks that are either buying and or selling? Yeah. You know, I've been in the community a long time. And I was at a spot where I was running a pretty decent sized community and I saw a lot of activity. And I think what became of me is Craig Fulton, even before Evergreen, was deal structure. You know, I heard a lot of people running around like, oh, man, my business is worth this. It's worth that. It's worth this. And they get real focused on what's the number. And then when they get into a deal, it's like, wait, but what's this deal structure like? This doesn't look good for you. Like a five year earn out with like, hold on. I think a lot of people glaze over that. And it's important when you're going into the transaction to really put value to the deal structure. I was even at an M&A event recently and there was a whole hour on this just to educate people. Like how much cash are you getting at closing? Is there an earn out? What's that look like? And then importantly, this one stunned me. Does the buyer have financing? Again, think about buying a house, right? If you're selling your house, someone comes along with an amazing offer. You got to look, you usually look and say, how are they getting funding for this? I've seen deals where people have gone into it and they're in diligence for months and then the buyer comes along and says, oh, couldn't get financing deals over. It's like, wait, wait, we didn't have this. So I think that's something important to ask too. And it seems obvious. I say to people all the time, just because it's obvious doesn't mean you shouldn't bring it up. Right? Like, all the time. Like, I'm the guy at the airport. See something, say something. I'm like, okay, does everybody know this isn't working over here? Has someone been aware of this yet? Where's the car? You know, I think people got to really look at that part. And again, just like selling a house, right? It's like if a cash buyer comes along and says, we're going to give you full asking. Oh, that's nice. And then you get a counter offer. Someone's like, I'll go a hundred thousand over, but I want this inspection and this thing and this and this, like, you know, I'm just going to take cash once, so see you later. Even though it's a lower, that's the kind of stuff I'm talking about that I would advise people again, just even as Craig, aside from Evergreen, like, don't forget that. It seems simple, but sometimes people get excited by big numbers and they forget to check the details. So Craig, that's great advice on the deal structure. Now, you know, valuation is still important, right? Like, so how do, even before that, you got to know what you're worth, right? So if you're a seller, how do you, how do you know what you're worth? Yeah. And I'm sure everyone's heard every different type of number, man, you can get 16 X, you can get 4 X, you get this, that, there's numbers thrown around. There's a lot of confusion because the SAS business is not like an MSP, not like an MSSP. There is no Zillow for businesses. You're not going out there and getting this estimate. Everything's a one-off. And you should be working with a company that's valuing you that way, right? Getting down into the details. And we try and make this easy at Evergreen. We have a website, MSPvaluations.com. No strings attached. You can go out there, enter some in, and we'll come back with an estimate. Hey, you know, probably going to be in this range, let's talk. We also on our EvergreenSG.com, there's a resource section. We've got a lot of video content there where we talk about, you know, the process, almost like kind of like we're talking through a checklist, like expect this, then there's an LOI, then there's due diligence, then there's a legal, then there's the customer check, then there's the closing, then there's this. And we talk through that. We've got a lot of content out there and we're always happy to talk. And it's a non-pressure situation with us. No strings attached, happy to just give back to the community all the great things it's given us through our MSPs. Awesome. Well, thank you, Greg, for being on here. Thank you for sponsoring Connect and everybody. Tell us where, tell everybody before we leave, tell everybody where they can find you. And, you know, I know you talked about a couple of things, but feel free, tell them where they can get in touch with you guys. Yeah. So you'll see Evergreen out there. We have a pretty big team. There's Sidney Hockett, Ramsey Sayoun, myself, Isabel Coventry, you know, in the UK. We're at industry events. You'll find us there. Happy to have a conversation, but you can always stop by our website, evergreensg.com. We have a YouTube channel as well, but we'd love to hear from you. So if you're tuned in, jump on my LinkedIn too. I'm pretty sure I'm the only Craig Fulton out there. You'll see me. Send me a message. Thank you, Craig. And for everyone watching, we thank you and tune in every Monday on the Kaseya YouTube channel for another episode of M&A Impact. And if you're not yet a member of the M&A Concierge platform for MSPs, make sure to apply today. This is an amazing platform and a hundred percent free for both buyers and sellers. See you next time, everyone.
