Transcript
from those who have gone through or are going through the process and 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 you know when new episodes drop and you can even save the M&A Unpacked playlist for easy access. Today, I'm pleased to have Scott Huxley, Managing Principal at Syscom. They are an MSP in Grand Rapids, Michigan. Scott did his first acquisition during COVID. And if you want your daily IT chuckle, you have to follow Scott on LinkedIn, who puts out hilarious jokes every week, every day. I don't know how you keep up with it, Scott, but it's awesome. I love it. And thank you for being on the show. Yeah, I messed up a little on the intro. You'd think I'd get it right since I do it every week. Thank you. Yeah, it was the excitement around the jokes, wasn't it? I know. It was. The secret scheduling. But anyway, yes, happy to chat with you, Mike. Always good to connect. Yeah, we've known each other for a very long time. So this is going to be, this is unique for me, right? Because I've known you for a long time. You were a user of Audit. You still are a user of Audit. So that's where I met you years ago, probably now. And I know you use a ton of Kaseya products. So I talk to you on a regular basis. So this is going to be a little unique. You know, this is the first time I'm on one of these episodes with a few exceptions. Gary Pica, Fred Ficola, of course, Frank DiBenedetto. But most of the people I interview here, I'm just meeting them. So it's nice to have you here. And I wanted to let you introduce yourself a little bit more, you know, how did you get your start in the MSP world? So with Syscom, I've been in the organization here for close to eight years this year, coming from another technology background prior to that. And you know, Syscom as a company has been around quite some time since around 76. But eight years ago was really started my kind of journey into the MSP space and, you know, excited to continue to be a part of the community. So eight years and counting, which in our industry is obviously a very, very long time. Right. And you're a partner in the company. So correct. Yeah. Did you buy it? Like, how did you get into that? Did you come in as an employee and then become a partner or did you acquire the company? Like how did that all happen? Yeah. So I'm a CEO and like as the company has expanded originally, I came in the organization into like a sales role as we've grown. Obviously that organization requires leadership in certain key areas, defined roles in the organization. And my role in the organization is oversight of all the different parts of the business that we have to support the goal. So, yeah, really expanded, if you will, from an initial kind of like a sales career role to or onto our leadership team and being responsible for or involved, at least in the direction of where we're going. And M&A has been a big part of that story really over the last four years. That's awesome. And I think I heard you say, maybe I heard wrong, Syscom started in 76? Yeah. If you look us up, the company was founded in 76. Our CEO bought the organization around 2014. I joined around 2016. But the company itself has been around since 20, yeah, since 76. What did they do in 76? I mean, I'm pretty sure there were no MSPs really in 76. No, it's always a great topic of conversation with people that you meet because it's like what technology was around in 76. And the answer to that question is things like typewriters and things like that. The company was really had a lot of time and money invested in typewriters. And then, of course, like so many other IT companies, that journey takes you along the maturation of technology, right? You go from typewriters to things like fax machines and then to having a computer in the office, then to having two computers in the office. So I think if you look at kind of technology story, we follow a very same path, although maybe ours goes back a little bit further than most. But it's a great question. Yeah, typewriters. Yeah. Yeah. That's neat. Interesting. And how did your first acquisition pop on your radar? I know you talked about your first one was during COVID. I'm curious how that, you know, was it planned, was it not planned? What was it like doing it during COVID? So many questions. Yeah, it was a tricky time, of course. You know, in that time, if we can kind of cast our minds back, doing in-person meetings with people was practically a no-no, really. So a lot of it was done initially, at least virtually. And, you know, we recognized and around that time that as the business grew, that we needed another channel of the business to reach our goals. And M&A was going to be, you know, one vehicle to do that. And so we did eventually do an in-person meeting, but all those meetings for quite some time were literally kind of like what we're doing today. They were over Zoom or Teams and things like that. And then just basically collecting the due diligence and those things all virtually as we all basically, I don't know, sat around in our pajamas or something in 2020 and whatever we were doing. Yeah, it was tricky because you had to schedule times. There was only so many people could meet and everyone had to wear masks and all these things like that. And so, yeah, it was a very interesting time. Yeah, no doubt. So who was the company and how did you meet them? So the company itself was a company called Michigan Computer Solutions based in Detroit. They had two partners in the business, Ray and Len, and, you know, they've been trading close to 30 years, so they've been doing it a very, very long time. And you know, like so many of us, they were looking to retire. They had a broker at the time representing them in what they were trying to achieve. And that's how we made the connection through that broker and that's how we were made aware of it. They had a opportunity already on the table when we met with them, but they took that table. They took that deal off the table and decided to go with what we had to offer. So yeah, something that didn't look like it was going to move forward from what you could tell. Then, thankfully, it became our first more major acquisition. Interesting. And you said it was, they already had something on the table. Did you say that that wasn't going to happen or was yours like more? We came in, yeah, so we came in, met them, they already had an offer on the table from someone else. And I think, you know, I think ours, because we were similar, similar size organization, maybe a little larger, similar, the other offer on the table was less of a culture fit, I think, less of a fit for them. You know, a lot of the deals were involved in the existing owners retiring and things like that. And I think there was some situations there where maybe that particular deal, they wanted the owner to stay on board for another year or two and be a part of a bigger organization. And maybe like all of us, when we get to that certain age, like, you know what, I just want to take my money and get the heck out of here. So I think it was just a better fit. And it was a better fit, probably cultural wise, because there was, we were probably more closer aligned culturally than the existing deal. So the existing deal, they took off the table, changed their minds, went with us and the rest is history. Yeah. And I know we talked about culture fit and the importance of that. And I know you in your M&A minute, you touched on that. Yeah. That's, that's a pretty important thing. And you know, you're not the first person who's, who's talked about that. Some people, you know, it's, it's, you see this all the time, or I see this all the time talking to folks who are acquiring is that, and being acquired is that money isn't always the most important thing. There's a lot of factors. So I'd love for you to dig deeper into that. You know, why is that so important and how do you, how do you figure that out? Yeah. I mean, I would say to anyone that due diligence only takes you a certain part of the story. And you know, it's tentative really, because, you know sometimes the employees aren't necessarily always aware that, that, that the, that the owner or the parties are looking to sell. So you can't go around the table and interview all the employees to gauge culture. And even if you could, could you really gauge the culture in like 10 or 15 minute chat with someone, but it is super important because, you know, I always say that once the deal is done, that's when really the hard work begins at that point. And if you have a big, you will have different fits in the sense of technology. And we'll probably touch on that here later, but, but those are relatively more straightforward to overcome. What you cannot overcome is a very, very different culture and mindset that you inherit. And if it, if it doesn't fit with you as an organization, that can be, that can be almost impossible, I would say to overcome. So you've got, you know, and so yeah, you've got to do your due diligence. You've got to dig in a little bit deeper and you've really got to know possibly when to walk away with something that maybe walk away from something that maybe fits financially, but you look at it from a, from a culture standpoint and go, I don't think this is going to be a good fit. This is maybe not going to work. Yeah. Yeah. And okay. So now that was done during COVID. So around what, 2020 ish? Correct. Yes. Yes. So what's happened since? What other acquisitions? Yeah. We went from a company that didn't do any acquisition to a company that, you know, did it relatively frequently. So we fast forward from COVID by about two years. So circa 2022, a friend of mine in the industry, you know, located in the Pennsylvania area was looking to sell his MSP and, you know, we were able to put together a deal. So the next one that we did was, you know, around 2022 through a friend of mine that was looking to sell on exit. So that was 2022 in a completely different state. So, you know, with acquisition comes, you know, challenges and exciting opportunities. You know, it's the first time that we were in a different state. And then, you know, laterally, so 2023, last acquisition was also again in the Detroit area that we concluded in around October of 2023. What is, so tell us about the sizes and the kind of the makeup of those MSPs that you acquired if you could, you know, walk us through that process. So there's certain dynamics of the acquisitions that follow the same traits, really. I would say usually the ones that we're involved in, the owners looking to retire, as I touched on earlier, they're looking to exit the organization. And then from an employee standpoint, most of the ones that we've done thus far have been, you know, typically between, you know, seven to five, you know, seven to five employee type organizations is usually who we're engaging with at the time. And I want to talk about a little bit from a buyer perspective, let's, you know, you're talking to other buyers, you've had your first acquisition came to you, right? Like you weren't out there looking for it. Maybe after, at some point you are looking for it, I'd love to kind of, how do you find these people? Well, you have to have a plan, right? Lots of people want to get involved in M&A, but you do have to actually go out there and do the work. So we work with an organization that goes out and reaches out to organizations, other MSPs to say, hey, are you interested in having a conversation about selling? So we're actively looking, it's not a passive thing. A lot of acquisitions in our industry, of course, happen through connections and friendships and things built through things like peer groups and other resources and things like that. The ones that, well, that instance, I had a friend in the industry that was looking to sell, but typically, you know, we have an entity reaching out for us, reaching out to MSPs and at least it's starting the conversation to see if there's, you know, some interest in that. So a lot of times chatting with other MSP owners, like, oh yeah, I get five calls a week, you know, from companies that are expressing an interest in my, in the business. So we're probably one of them. Interesting. And, and, you know, without going into details, you don't have to reveal who you're using, but what would you, you know, if you're talking to another buyer and they say, Ooh, maybe I should hire that company or a company, what would you recommend to them? Or, you know, can you tell us a little bit about it without, you know, giving too much away? Naming names. You do have to find an organization that's going to go out there and going to represent you. You know, you can have an interest in M&A, but you do need to go and find an entity that will reach out to MSPs on your behalf, it will pick up the phone. So, and there's lots of different entities that, that, that offer that type of service. A lot of times it's the same companies that are offering valuations for MSPs. They offer, I guess what you could call buyer side representation. And you know, there are, I would say three or four common names that crop up for representing you when you, and reaching out to these people on your behalf. And for me, it starts there, having an active component of the M&A story and basically picking up the phone and reaching out to these MSPs to see at least if they want to have a conversation about that journey and what that might look like. Yeah. And for, for folks listening and you're thinking, how do I find those entities that do that and help you talk to us at the M&A concierge platform for MSPs, because they're all involved with us as well. They're all here and we can happily help you help guide you to where you need to find, you know, to help you find the folks that will help you. So good advice, Scott, integration. Let's talk about that. You know, walk us through the integration process. How do you, what happens when they become a Syscom company? Do they stay on their own? Do they keep their own name? Do they, what happens after the sale is made? For a while things, you keep the status quo as it is, you know, people that are using different technologies. Well, one thing you cannot do is you cannot impair the service for the clients and the experience that they got through acquisition. So the first thing is to keep things, to make sure that the clients still get in the same degree of service that they always did. Therefore you can't just show up with a new tool that they've never seen before and expect them to use it out of the gate. You know, we use a variety of Caseta tools and the long-term objective is to have every entity that we acquire basically be on the same tool set because, you know, in terms of economies of scale, both from the technical standpoint, that is serving the client, the technical standpoint from what you're supporting, it would not make sense to have, you know, three organizations under your umbrella all running different platforms. As a business, we've always tried to standardize whenever and wherever we can. So, you know, over time we ultimately move those people over to the Caseta platforms that we have to make their lives easier and also to make our lives easier as well so that we can function as one business organization because a lot of times you're functioning now over multiple states. So yeah, the integration is a big part of the story for sure. Yeah, and I think I've heard you say once or twice before that that's one of, if not the most difficult part of a purchase. Is that correct? Yeah, it is. It is difficult to do, at least do well, even with best laid plans. You've got people to train. I think critically too, you've also got to make sure that the new employees you're working with are seeing the why behind what you're doing rather than just going back to what I said about culture earlier. You really have to help them understand as to why you made the decision to use what you're using and how it's going to benefit them because everyone comes from a different level of where they're at knowledge wise and experience wise and thought wise. So you really have to sell them on the why first rather than just say, hey, we use Caseta like it or take it or leave it. They have to understand why and also how it's going to help them. And that takes time. You can't just say, hey, next month we're switching to this tool because that's what we use and we don't care what you use before. And I think the other thing too is to that end, every acquisition we've done thus far, we've always learned a couple of things where we walked away with new information that we didn't know before. But your core stack of how you support your clients and how you deliver the service, you have to have one platform for everybody. Otherwise it's not scalable. We're trying to build a scalable business basically and serve clients while we're doing it. So it's harder than people maybe give you credit for. Yeah. And you are doing something that is, you said specifically you're looking for MSPs who are owners are looking to retire. So they have employees and I'd love to explore this a little bit. When do the employees find out? Like because a lot of everybody's different, right? Like some folks they're operating the company, the owners stay along, right? They become CEOs in the company. They become stakeholders in the company. That's not happening with you. No. A lot of times the employees don't know. Sometimes they do. It depends on how much the owner of that MSP is sharing with those people. I think most times it's not a well-known fact because the fear is that it could create uncertainty in the company and it could cause your best technician or your best salesperson or your best whoever it is to up and leave because of the uncertainty around that acquisition. And the very first one that we did, the employees didn't know and the broker in that particular instance really erred on the caution of, okay, let's get this deal done and then deliver the information to them. So that was how that one occurred. So it was a surprise. But I also will back end that statement with, whilst it sounds kind of shocking that you come in one day and it's like, surprise, your IT company just got sold. I have this sneaking suspicion that so many MSP owners sort of check out after a while and employees start to pick up on it. You know what I mean? Like I do feel, and it was, as you get to know the people post acquisition, they start opening up and saying to you, yeah, you know what, I kind of knew that, I knew something was up. I knew that they didn't have the same passion. They didn't have the same energy. I knew that they were more than likely selling. So it may not be as a bigger surprise as you think. Yeah. And can you share any stories? You know, what's, what's when, has anything gone wrong? Did it all go right? Like what's, let's hear some, some more stories because it's an interesting conversation to have. I am Scott and I'm your new owner. Yeah. To be honest with you, I think the first one is probably the most awkward in the sense that myself and Brandon, we chatted with the broker. So Brandon being a CEO, chatted with the broker and he says, okay, so we're going to close up, you know, close everything up. And then there's a restaurant just up the road and then we'll all meet there at like 12 o'clock. So it's like, you get there at 12 and you sit down and then you're waiting for these people to come in together with them, with the, you know, prior ownership, they're like, Hey, let's get together for a lunch at 12 o'clock. And they come in and they sit down and they're like, Oh, and I just wanted to kind of, Hey, this is Brandon and this is Scott. So in terms of being in levels of awkwardness, that probably, you know, is up there for sure because it's awkward for you and it's clearly awkward for them. And that's probably one of the, one of the more interesting stories of just sitting down there and being like, Oh, here's Scott and here's Brandon. By the way, you know, these, these are the new people involved in the organization and I'm retiring. So that probably ranks amongst the top. Yeah. And that's what have you learned, you know, how, how have you changed and evolved that or is it still just as awkward today or do you, do you have the system in place too? I think it's initially, it's always awkward. And the thing is though, once you get past that awkwardness and rip the bandaid off and I do understand to some extent how you find yourself there because if you're selling, you don't want your best people to leave. You don't want to create uncertainty. You do want to make sure that everyone, your clients, your employees, everyone that's connected with the organization feels your, feels that you're still there, but you do. So I understand why people don't kind of overshare in that arena. In terms of what I've learned, to be honest with you as a buyer, you're really in the hands of a broker and seller really, you know, you don't have too much control over that story really. What I will say though, is a positive point to it is you usually end up being the good guy in the end because there's things that you're able to do, there's promotional opportunities for individuals to get promoted. We typically promote at least two people, you know, from an acquisition into different roles in the organization, whether it be leadership or something like that or management team. But yeah, it's not a narrative we control too well, unfortunately we just, I guess we just learned to become more comfortable with being awkward. And has everything gone according to plan or have you, have you lost, you know, employees along the way or has everybody been happy? Yeah. I mean, I don't think there's ever a, you can build plans out and it's good to at least know where you're going. Certainly wouldn't be a great idea to do it and then not really know what things are going to be on your to-do list to tackle. And in terms of the question of employees, generally answers no, I would say. Now that being said though, for an IT company that's been around for several years, what I've seen is you may well, because we have a high degree of accountability in the business, you know, once you scale to where we are today and where we intend to be in the future, there's a high degree of accountability and a high degree of metrics. If you're not used to that high degree of accountability and high degree of metrics, now all of a sudden it starts to feel a little bit uncomfortable for you, which goes back to what I said earlier about culture fit. Some people can adapt. And then I think frankly, sometimes you find you may have an employee, one or two that maybe the owner just maybe was on the fence about, maybe should have made that decision earlier. And the numbers and the accountability that you now have enables you to make those decisions arguably probably should have been made, you know, two years ago or something like that. So yeah. And how do you look, you know, you're doing your due diligence. And part of that is, especially with culture fit being so important is, you know, if they've got three, four, whatever employees, you want to make sure those employees are going to be successful in your company, obviously, and you don't want them to quit right away and take away all the customers that like them. How do you, how do you do your due diligence when they don't know that what's going on? Well it is awkward. A lot of it is driven obviously around the financials. We know that. But the financials don't address the culture gap. To deal with it with a friend of mine, we were able to have an NDA in a training session where we had someone come in who was doing training for us. And we said, look, even though this isn't necessarily inked yet, we'll do an NDA to have these employees come to experience what it's like in one of our training sessions. You don't always get that opportunity though. A lot of times you can speak to a key employee or a couple of key employees, depending on how many individuals they have. That particular one were able to do that, have an NDA in place. And then, you know, they kind of left us raving fans. You know, we got to know them a little bit more and they were able to kind of cement that with the owner that was ready to sell. But that individual had to be on board with that because of course the deal wasn't written in stone at that point. It is tricky though, Mike, in the sense of being able to have those conversations because a lot of times a seller doesn't want you to talk to them because what if the deal doesn't come through? You know, what if, you know what I mean? So it is tricky, but it's also a big component. So I guess my words of wisdom, if you call it, is be creative, you know, understand it's important and see if you can do things like what we did as an example to help you really fathom that out. Great advice. So let's talk about the companies you're looking for, you know, you're in front of the audience of many, many sellers or many potential sellers. Who should raise their hand and talk to you guys? Well, not anyone, but yeah, I mean, most entities that we're talking to, you know, typically there's somewhere between, I'd say a million to 4 million in revenue is who typically we're talking to, typically with a staff of anywhere, like I said, between five to seven plus people. So those are the, you know, those are the kind of the profiles. And then also, you know, the, an owner or owners in some cases that are, you know, not looking to, because there's many ways of doing M&A, right? You've seen roll up acquisitions where CEOs of MSPs have become part of a bigger entity. The ones that we've done thus far, maybe that'll change in years to come. I don't know. But, you know, owners that are looking to retire, you know, owners that want to leave their MSP in good hands with a company that has the same ethos around serving clients that they did. And yeah, it's between that million to four in revenue and is looking to exit without their cell phone buzzing when they're sitting there on the beach. Awesome. Well, really interesting conversation today, Scott. Thanks for doing this. And again, I would, I would urge folks to go find Scott on LinkedIn, follow him because he's going to make your day with his daily jokes and network. You know, Scott is one of those people who loves anybody. So I'm volunteering you, Scott, they can reach out to you and talk to you, I'm sure. And why don't you tell them, tell folks how we can, how they can reach you. And I will put Scott's contact info in the notes on YouTube channel too, so you can get that there. But Scott, let everybody know how they can reach you. Which way can you not reach me? LinkedIn is probably the easiest way for those that aren't familiar with me. And obviously other than that, you know, email, you know, scott at syscom business.com is another way you can email me directly. And as Mike said, I'm always open to discussion with people, whether it's on the sell side or buy side. It's a big component of our industry. So I'm always happy to chat and help in any way I can. Not necessarily just related to M&A, but always open to a conversation and always happy to help in any way that I can. Well, Scott, thank you for sharing and taking your time out of the day with, with to share with the MSP community and for everyone watching. We thank you and tune in every Monday on the Kaseya YouTube channel for another episode of M&A Unpacked. 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. It's a hundred percent free for both buyers and sellers. See you next time, everyone.
