CEO Series: Leveraging Acquisitions to Deliver Customer Value through a Buy and Integrate Strategy

CEO Series: Chapter 1
Written by Anthony J. D'Ambrosi, CEO of Abacus Group

As a veteran of the IT Outsourcing and Managed Services industry, I have been directly involved in over twenty acquisitions, ranging from smaller tuck-ins to large multinational deal structures. In my opinion, there are a few fundamental strategies, and many misconceptions, about the true value that an acquisition can bring to a modern Managed Service Provider (MSP) and its core stakeholders; namely its clients, employees, shareholders and partners.

In this chapter, I want to focus on the client-oriented value proposition of an MSP acquisition and dispel some common misconceptions. For clarity, the perspective will mainly be from the buying entity, as this embodies the vast majority of my experience.

Firstly, the term I often find cringeworthy is “roll up.” This term is commonly misapplied to all acquisitions, when in fact, it implies a less thoughtful M&A quest for scale, market reach and increased profit, whereby the acquirer simply adds-on companies with little integration or transformation. The issue for clients of a “roll up specific” approach is that they often suffer more from their MSP’s distractions and politics versus the delivery of any additional value.

These federated, non-integrated, M&A operating approaches may look appealing in a financial model, but often fail to deliver any true client benefits. In fact, more often than not, clients enter a season of disillusionment just awaiting the empty promise of additional offerings, capabilities or expertise, while their quality of service and relationships may suffer. For these reasons and many others, my strategy for successful M&A will always be “buy and aggressively integrate.” This approach holds true for all types of acquisitions and investments, whether they be for geographic market reach, additional capabilities, and/or innovation oriented.

The key to the success of this “buy and integrate” discipline is to develop a comprehensive Post Merger Integration (PMI) plan very early in the M&A lifecycle, putting the clients at the epicenter of value creation. Mapping out an actionable plan to deliver additional services, capacity, and capabilities to the existing clients on both the buy and sell-side of the transaction is a critical success factor for this approach. As part of the PMI planning process, we will seek to proactively minimize client-specific disruptions, negative changes, and/or confusion. Of course, we still seek all of the operational synergies possible, but this is done through a risk mitigation lens against any synergies that detract from delivering tangible client value.

A fundamental understanding of MSP organizational design at scale is required for this type of M&A. Whether it be corporate shared services, global delivery operations, specific service catalogue options, or client lifecycle management, these structures need to be thoughtfully combined, preserving the best practices from each organization and thus creating an enhanced company that is more valuable to its clients than the sum of its parts.

Two great MSP market examples of “buy and integrate” at work are cybersecurity and customer service management platforms. In today’s cyber threat and compliance-ladened world, enterprises of all size and scale require a multidimensional approach to cybersecurity. More and more MSPs are adding these capabilities and offerings to their portfolio, many through M&A. While good governance entails logical and objective separation of some cyber services from core IT managed services, a well-integrated cybersecurity acquisition by an MSP can achieve this separation while also delivering end-to-end cyber risk management, threat protection, managed detection, response and remediation services seamlessly. In fact, more and more clients are realizing the material benefits of having their MSP as their MSSP (Managed Security Service Provider) as well.

From a customer service management perspective, whereby CRM and ITSM (IT Service Management) platforms are at the very heart of most MSP operations, there are also major client benefits to be realized from the buy and integrate M&A strategy. As part of PMI, the best practice is to migrate the acquired company onto a single platform of record and engagement. While there are certainly multiple techniques to systems integration, none will deliver a completely seamless experience for a client across the entire engagement lifecycle. A singular client management platform strategy for acquired companies supports optimal outcomes from quality of service to analytics and insights, through engagement expansion and renewals.

“Buy and integrate” approaches to M&A certainly requires more focused effort and expertise than “rollups”, but in the end, this approach always delivers superior client outcomes. Clients experience additional benefits from the well-integrated service provider business model, which ultimately creates increased enterprise value for the MSP and its investors.

In my next chapter, I will focus on M&A benefits from the perspective of all employees, both on the buy side and sell side.