{"id":14628,"date":"2015-10-15T07:46:45","date_gmt":"2015-10-15T14:46:45","guid":{"rendered":"http:\/\/www.enxmag.com\/twii\/?p=14628"},"modified":"2016-09-15T09:43:51","modified_gmt":"2016-09-15T16:43:51","slug":"playing-the-dealer-msp-match-game-with-gap-partners-and-zygoquest-group","status":"publish","type":"post","link":"https:\/\/www.enxmag.com\/twii\/feature-articles\/2015\/10\/playing-the-dealer-msp-match-game-with-gap-partners-and-zygoquest-group\/","title":{"rendered":"Playing the Dealer-MSP Match Game with GAP Partners and Zygoquest Group"},"content":{"rendered":"
\"Mitch

Mitch Morgan<\/p><\/div>\n

The number of dealers open to adding Managed Services to their menu of products and services offerings is growing as scores of industry consultants and even the OEMs themselves validate this new- fangled business model for the document imaging industry. There\u2019s so many ways to do it, including doing it yourself, leveraging the resources of your OEM such as Konica Minolta\u2019s All Covered or Ricoh\u2019s CHAMPS program, or acquiring an MSP.<\/p>\n

Each option is ripe with risks and rewards, albeit some options might be considered riskier than others. Arguably, the riskiest is acquisition as this approach requires due diligence and ensuring in advance, as best as possible, that the two parties can peacefully and successfully coexist under one roof with a mutually agreed upon goal.<\/p>\n

At the risk of over generalizing, most dealers don\u2019t have the background or discipline to handle an acquisition on their own. Sometimes outside help is what\u2019s needed to find the appropriate match and manage the process. That\u2019s where GAP Partners and the Zygoquest Group come in. GAP Partners provides Managed Services training and possesses a wealth of knowledge in the space and is a Continuum partner. GAP Partners has also aligned itself with acquisition specialists Zygoquest Group who is adept at matching buyers and sellers as well as handling the due diligence aspect of the match.<\/p>\n

During the annual Continuum Navigate 2015 conference in Las Vegas in September, ENX\/The Week in Imaging spoke with Mitch Morgan and Chris Ryan of GAP Partners as well as Mike Dudek of Zygoquest Group about the process of matching dealers with MSPs.<\/p>\n

The roots of GAP Partners\u2019 partnership with Continuum were planted a few years ago after Continuum saw the promise in the office equipment channel. \u201cWe align dealers with their solutions,\u201d says Morgan.<\/p>\n

According to Morgan, Continuum is about 60 percent less expensive than its competitors and by far the largest organization of its kind in the Managed IT Services space.<\/p>\n

\u201cThis fits well with our client base because they\u2019re looking for a reliable supplier who can provide a cost effective service,\u201d states Morgan. \u201cMany office equipment dealers aren\u2019t looking to build their own infrastructure and this [approach allows them to] focus on selling it and scaling it as quickly as they want to.\u201d<\/p>\n

For dealers interested in starting a Managed Services business there\u2019s one thing they tend to be looking for from the outset.<\/p>\n

\u201cThey want a business model, which we created with Continuum,\u201d states Morgan. \u201cContinuum manages 600,000 devices, they know how often they fail, what happens when they do, what the metrics should look like from an operational perspective, and they have financial metrics for that.\u201d<\/p>\n

Another thing dealers want to know about is what\u2019s involved in the sales process, i.e., how to sell it and how to identify the target market.<\/p>\n

\u201cFrom a dealer perspective they want to get comfortable with outsourcing,\u201d says Morgan. \u201cThey\u2019re pretty good at servicing their customers and control oriented, and sometimes they have to get comfortable with releasing that control. Once they do that and see how it scales what they say is \u2018We like what we\u2019re doing, we want to go faster.\u2019\u201d<\/p>\n

As dealers start enjoy some successes and Managed Services becomes a larger part of their revenue, that\u2019s when some start thinking about acquiring an MSP as a means of accelerating the business. The risk, however, is taking two separate businesses and pairing them together. Here it helps to understand the type of MSP owner that makes the best fit in this scenario.<\/p>\n

\u201cIt works best when you have a business owner who likes taking care of customers, enjoys the technology, would like to build a process they can scale, but doesn\u2019t want to take the HR calls and worry about payroll,\u201d says Morgan. \u201cWhen it works really well, and it has in a number of cases, it\u2019s a good operator who wants to grow faster than he can probably grow on his own, and an office equipment dealer looking to make an acquisition and let that person run that business within a business, and provide the support to make that person part of the team.\u201d<\/p>\n

What\u2019s helped GAP Partners and Zygoquest Group in their mission to match dealers with MSPs is that the MSP business has become more understandable to the office technology dealer channel.<\/p>\n

\u201cThe MSP businesses is a contract-based business with a recurring revenue stream, which is easy for people like Mike Dudek to wrap their arms around from an evaluation perspective,\u201d says Morgan. To date GAP Partners and Zygoquest Group have made seven acquisitions since joining forces.<\/p>\n

Dudek and his partner Rich Wisniewski bring a lot to the table as acquisitions specialists; something that Morgan concedes GAP Partners is not.<\/p>\n

\u201cWhat I know about acquisitions is what Mike taught me,\u201d he says.<\/p>\n

For dealers looking to acquire an MSP, what\u2019s the criteria for matching and MSP with a dealer?<\/p>\n

\u201cThese are smaller businesses,\u201d says Morgan. \u201cEmployee count is where we start. That\u2019s probably one of the biggest indicators of the size of the business overall. Most of those employees are technical people.\u201d<\/p>\n

He further explains that recurring revenue and an interest in transitioning the business from a traditional break-fix model to where 60-70 percent of revenue is recurring or under contract is the ultimate goal.<\/p>\n

\"Mike

Mike Dudek<\/p><\/div>\n

Dudek and Wisniewski represent both buyers and sellers. For the buyer, Dudek looks at the size of the business, what its wherewithal is, and the market they\u2019re in.<\/p>\n

\u201cIf it\u2019s a $10 million office equipment company they may be in the market for a $1 million or $2 million MSP,\u201d says Dudek. \u201cIf you\u2019re looking at a $50 million office equipment company they may have a bigger appetite. It all depends on the profile of buyer, the market, and the supply.\u201d<\/p>\n

He reports that there are many MSPs in every market he looks at, albeit the MSP market is very fragmented.<\/p>\n

\u201cWe\u2019re basically identifying the possibilities, interviewing them and understanding how much of their business is recurring and where they are in their business model,\u201d states Dudek. \u201cAt the end of the day, it often comes down to personalities, culture, and the respective owners of the businesses and whether they\u2019re compatible or not.\u201d<\/p>\n

\u201cMike described these guys are fragmented and small and that\u2019s the predominance of what we see,\u201d adds Morgan. \u201cWe\u2019re also looking for a level of business maturity, not just the owner, but also to build some scalable processes. That\u2019s important, especially for a smaller guy.\u201d<\/p>\n

Dudek believes that a fragmented high-growth industry such as the MSP industry is tailor made for consolidation.<\/p>\n

\u201cWe\u2019ll do any size transaction,\u201d he says.<\/p>\n

There\u2019s a fair amount of dealers who have made acquisitions on their own, some have worked out and others have not. Rather than repeating their mistakes, some dealers are more open to working with an outside party to ensure a better fit.<\/p>\n

\u201cYou have to follow the process,\u201d says Morgan. \u201cThere are lots of traps, and based upon the experience Mike brings to the table, we\u2019re able to help people avoid those.\u201d<\/p>\n

\u201cWe have expertise, we know what can go wrong, and not every single deal we do will be a home run for someone,\u201d acknowledges Dudek. \u201cBut if you follow the process, know what to look for, and do your due diligence before making an offer, that\u2019s why our combined expertise is very valuable.\u201d<\/p>\n

For those wondering what it costs to hire outside acquisitions help, Zygoquest\u2019s fees are typically based on a percentage of the transaction.<\/p>\n

\u201cThese aren\u2019t large transactions, and they pay for themselves,\u201d states Dudek. \u201cOn the buyer side, you\u2019re not paying us unless we find a fit. On the seller side, there\u2019s a low upfront fee and we don\u2019t see any money unless we [complete the acquisition].\u201d<\/p>\n

The other thing Dudek and Wisniewski do is offer a full scope of advisory and legal services. This can be especially attractive as he\u2019s seen clients over the years run up large legal bills related to an acquisition.<\/p>\n

A concern among MSPs that are considering selling their business is what happens to them after the deal closes?<\/p>\n

\"Chris

Chris Ryan of GAP Partners and Rich Wisniewski of Zygoquest Group at Continuum’s Navigate 2015 conference.<\/p><\/div>\n

\u201cA lot of MSP owners think after they sell the business will they want you?\u201d says Morgan. \u201cYes they will; they want you to build a business within their business.\u201d<\/p>\n

He recalls an MSP from Cincinnati who told him after he sold his business he\u2019s managing more than he ever thought he would plus he\u2019s working for people who are bright professionals and who he enjoys working for.<\/p>\n

Ultimately, the culture of the two companies is critical and that\u2019s where the matchmakers must ensure a good fit. \u201cThere\u2019s going to be barriers, there\u2019s going to be mistakes, people who acquire and who forget that that MSP owner is the sales organization and the MSP owner flees,\u201d notes Morgan.<\/p>\n

One issue to resolve up front is identifying how that MSP owner will participate in the business and what needs to be done to get them to stay because if they leave the dealer has lost the asset they bought.<\/p>\n

Another benefit of working with an outside organization such as GAP Partners and Zygoquest Group is that they can usually expedite the acquisition process, particularly when it comes to identifying candidates for acquisitions.<\/p>\n

\u201cWe have a substantial database of MSPs,\u201d says Dudek. \u201cIf an office products company calls us and says I want to buy an MSP in Boston, we already have a database and we can use our resources to see who is available. We\u2019ve made a big investment to facilitate that and make the process more efficient. We know what processes to follow and can move this as quickly as people can provide information.\u201d<\/p>\n

GAP Partners and Zygoquest Group have closed seven deals to date and at press time had another deal closing and several more in the pipeline.<\/p>\n

At the end of the interview I asked Morgan, Ryan,\u00a0and Dudek what they might tell me 12 months from now should I run into them at the Continuum Navigate 2016 conference.<\/p>\n

\u201cWe\u2019ve had a meaningful impact on the office technology dealer and have helped them transition their business into adjacent strategies,\u201d responds Morgan. \u201cAnd that we\u2019ve been able to help them transition faster [into Managed Services] and have helped MSPs scale their businesses in the right way.\u201d<\/p>\n

\u201cI would hope we made a stake for MSP acquisitions not only in office products industry, but in the MSP industry and that we\u2019re recognized as a name and a go to company for these entrepreneurs, and we have a healthy combination of buyers and sellers, which make the world go round for us,\u201d adds Dudek.<\/p>\n

\u201cIf we look back on the year and are able to say we were able to pair two progressive companies together for their mutual benefit and to take advantage [of the opportunities in the market],\u201d concludes Ryan.<\/p>\n","protected":false},"excerpt":{"rendered":"

The number of dealers open to adding Managed Services to their menu of products and services offerings is growing as scores of industry consultants and even the OEMs themselves validate this new- fangled business model for the document imaging industry. There\u2019s so many ways to do it, including doing it yourself, leveraging the resources of your OEM such as Konica Minolta\u2019s All Covered or Ricoh\u2019s CHAMPS program, or acquiring an MSP. Each option is ripe with risks and rewards, albeit some options might be considered riskier than others. Arguably, the riskiest is acquisition as this approach requires due diligence and ensuring in advance, as best as possible, that the two parties can peacefully and successfully coexist under one roof with a mutually agreed upon goal. At the risk of over generalizing, most dealers don\u2019t have the background or discipline to handle an acquisition on their own. Sometimes outside help is what\u2019s needed to find the appropriate match and manage the process. That\u2019s where GAP Partners and the Zygoquest Group come in. GAP Partners provides Managed Services training and possesses a wealth of knowledge in the space and is a Continuum partner. GAP Partners has also aligned itself with acquisition specialists Zygoquest Group who is adept at matching buyers and sellers as well as handling the due diligence aspect of the match. During the annual Continuum Navigate 2015 conference in Las Vegas in September, ENX\/The Week in Imaging spoke with Mitch Morgan and Chris Ryan of GAP Partners as well as Mike Dudek of Zygoquest Group about the process of matching dealers with MSPs. The roots of GAP Partners\u2019 partnership with Continuum were planted a few years ago after Continuum saw the promise in the office equipment channel. \u201cWe align dealers with their solutions,\u201d says Morgan. According to Morgan, Continuum is about 60 percent less expensive than its competitors and by far the largest organization of its kind in the Managed IT Services space. \u201cThis fits well with our client base because they\u2019re looking for a reliable supplier who can provide a cost effective service,\u201d states Morgan. \u201cMany office equipment dealers aren\u2019t looking to build their own infrastructure and this [approach allows them to] focus on selling it and scaling it as quickly as they want to.\u201d For dealers interested in starting a Managed Services business there\u2019s one thing they tend to be looking for from the outset. \u201cThey want a business model, which we created with Continuum,\u201d states Morgan. \u201cContinuum manages 600,000 devices, they know how often they fail, what happens when they do, what the metrics should look like from an operational perspective, and they have financial metrics for that.\u201d Another thing dealers want to know about is what\u2019s involved in the sales process, i.e., how to sell it and how to identify the target market. \u201cFrom a dealer perspective they want to get comfortable with outsourcing,\u201d says Morgan. \u201cThey\u2019re pretty good at servicing their customers and control oriented, and sometimes they have to get comfortable with releasing that control. Once they do that and see how it scales what they say is \u2018We like what we\u2019re doing, we want to go faster.\u2019\u201d As dealers start enjoy some successes and Managed Services becomes a larger part of their revenue, that\u2019s when some start thinking about acquiring an MSP as a means of accelerating the business. The risk, however, is taking two separate businesses and pairing them together. Here it helps to understand the type of MSP owner that makes the best fit in this scenario. \u201cIt works best when you have a business owner who likes taking care of customers, enjoys the technology, would like to build a process they can scale, but doesn\u2019t want to take the HR calls and worry about payroll,\u201d says Morgan. \u201cWhen it works really well, and it has in a number of cases, it\u2019s a good operator who wants to grow faster than he can probably grow on his own, and an office equipment dealer looking to make an acquisition and let that person run that business within a business, and provide the support to make that person part of the team.\u201d What\u2019s helped GAP Partners and Zygoquest Group in their mission to match dealers with MSPs is that the MSP business has become more understandable to the office technology dealer channel. \u201cThe MSP businesses is a contract-based business with a recurring revenue stream, which is easy for people like Mike Dudek to wrap their arms around from an evaluation perspective,\u201d says Morgan. To date GAP Partners and Zygoquest Group have made seven acquisitions since joining forces. Dudek and his partner Rich Wisniewski bring a lot to the table as acquisitions specialists; something that Morgan concedes GAP Partners is not. \u201cWhat I know about acquisitions is what Mike taught me,\u201d he says. For dealers looking to acquire an MSP, what\u2019s the criteria for matching and MSP with a dealer? \u201cThese are smaller businesses,\u201d says Morgan. \u201cEmployee count is where we start. That\u2019s probably one of the biggest indicators of the size of the business overall. Most of those employees are technical people.\u201d He further explains that recurring revenue and an interest in transitioning the business from a traditional break-fix model to where 60-70 percent of revenue is recurring or under contract is the ultimate goal. Dudek and Wisniewski represent both buyers and sellers. For the buyer, Dudek looks at the size of the business, what its wherewithal is, and the market they\u2019re in. \u201cIf it\u2019s a $10 million office equipment company they may be in the market for a $1 million or $2 million MSP,\u201d says Dudek. \u201cIf you\u2019re looking at a $50 million office equipment company they may have a bigger appetite. It all depends on the profile of buyer, the market, and the supply.\u201d He reports that there are many MSPs in every market he looks at, albeit the MSP market is very fragmented. \u201cWe\u2019re basically identifying the possibilities, interviewing them and understanding how much of their business is recurring and […]<\/p>\n","protected":false},"author":3,"featured_media":14630,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[82,1638],"tags":[2460,1873,2458,2359,2459,2461,2462,2032],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/14628"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=14628"}],"version-history":[{"count":11,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/14628\/revisions"}],"predecessor-version":[{"id":14731,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/14628\/revisions\/14731"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media\/14630"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=14628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=14628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=14628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}