MSP M&A Stories: Taking The Purple Guys to a $60 million-plus Business

When it comes to M&A, for some MSPs it’s just part of their DNA. In this blog we talk to Kevin Cook, CEO of The Purple Guys, about his company’s M&A journey, why standardization is critical during M&A, and some of the key lessons they’ve learned along the way.

N‑able: Tell me a bit about The Purple Guys.

Kevin Cook: It’s been a long journey. The story really starts with a company called Enterprise Computing Services (ECS), from Shreveport, Louisiana. At the time, and this is back in 1997, I was working for a certified public accounting (CPA) firm, and I was trying to build an IT practise for them, but just kept running into roadblocks. We couldn’t take commissions, and we were leaving all kinds of revenue on the table.

When I met ECS, they were a small, talented group of people that needed some business acumen and expertise added to the mix. Happily, I was able to convince the managing partner at the CPA firm to let me take one of my resources, spin us out of the firm, create a new entity, and merge it with ECS. And that eventually became The Purple Guys. So M&A has been part of our DNA since way back in 1997.

Initially, we grew the business through referrals. We took things very slowly to start with—the way that I had learned to build a business from the CPA firm. Then, in 2010, we bought a small company called Arklacomp Computers. John Katz, who’s still our CTO, had built that business part time while he was working a civil service job on Barksdale Air Force Base.

This was a big pivot moment for us, as it was when we really got serious about managed services. John had built a really nice managed service offering, and we brought that into our client base, and were able to grow exponentially from the old time-and-materials model into managed services.

We did some other small M&A stuff of over the following few years. But our next big pivot came in around 2018 when the original founder was looking to exit. At this point, John and I sat down to try and figure out what the future would hold for this business and for us: what the legacy was going to look like? Who we were going to transition this thing to at some point?

We could see the industry was beginning to consolidate, and we decided we wanted to be a consolidator, and not be bought up by someone else. But we felt there was no way we could do this at the pace and the scale that we wanted to on our own, so we spent a bunch of time trying to find the right private equity partner to help us do that. This is when we found Kian Capital.

In January of 2020, we recapitalised the business and did our first acquisition simultaneously down in New Orleans, a business called NOLA. Sixty days later the country shutdown with COVID.

Obviously, we had to hit a pause on acquisitions, while we made sure that the business was as resilient as we thought it would be. Thankfully, it turns out it was. We talk about MSPs being recession resilient and our business stood up really well to the pandemic.

N‑able: Why do you see M&A as such an important part of your business?

KC: For me, a big part of this is around the threat landscape. In order to really be able to provide the level of service around security that your clients need, you have to have scale. You need as many talented cybersecurity people as you can possibly hire. And in a small business—we were 43 people when we recapitalised—you just can’t build that kind of team. In some ways I view us as much as a talent aggregator as anything else, we want the best people so we can serve our clients better than any of the competition. So we focus on that; finding, recruiting, and retaining as many talented people as we can.

Geographic expansion plays a key role as well. We’ve had a strategy that’s been very much focused on the middle of the country, and there’s two reasons for this:

1. I think that segment of the country—with maybe Texas and Chicago aside—has gone unnoticed by a lot of the other large platform MSPs to date. They’re catching on, though, and I think we’re going to see more of those guys moving into those markets.
2. You can split integration into two areas: technical, and cultural. We do tool-based integration for our clients all day, every day. We’re really good at it. The real challenge when you integrate businesses is the culture. We felt like the middle of the country was very similar in terms of cultural alignment.

N‑able: What size are you at now and where do you see that going? Are you under any pressure to meet specific target growth?

KC: As we sit here today, I’ll call us a $50 million MSP with around 220 employees.

In terms of pressure? With private equity, there comes a whole different set of expectations and a different level of accountability. We chose our partner carefully, and they’ve lived up to what they said they were going to do. They have allowed myself and my team to set forth our vision and then go and execute against that.

For the most part, we’ve hit targets, and when you hit targets nobody asks a whole lot of questions. Of course, when you start to miss in areas, then certainly there’s a whole other level of scrutiny. But it’s deserved in my opinion. Part of the role of Private Equity is to make sure we’re keeping things on track. They add value in different ways to this business, and they bring some expertise in areas that I don’t have internally. Which is great. They’ve helped make the business better.Fortunately, we continue to execute really well. Of course, it’s not been perfect. Anybody who tells you it is, is just lying. But for us it’s worked really well and continues to go in a very positive direction.

N‑able: How has your relationship with N‑able helped you throughout this process?

KC: I would say N‑able’s been a really good partner. They’re one of a handful of very, very key partners for us. They’ve been there for us every step of the way.

I have access to a really great team, just in terms of day-to-day account management. The   for The Purple Guys has been spectacular. If I need something I call, or somebody on my team calls, and we get what we need very quickly. They’re very responsive to our needs, and very flexible. When you’re doing a lot of acquisitions, things change very rapidly and N‑able has shown a willingness to be flexible and pivot with us.

In terms of vendor relationships, I really don’t see N‑able as a vendor; I see them as a partner. And they’re one of the very top in my opinion. We both do things to benefit each other and that’s the definition of a partnership for me.

N‑able: Do you standardize on products when you make a new acquisition?

KC: We believe in full integration. Not all MSPs are doing what we do, and we feel that to really serve our clients the right way in the long term, we need to have everybody on the same platform. We have an integration process we follow, and we’ve gotten really good at it. But as I said earlier, the tools are easy, it’s the people are that are more challenging.

When we’ve acquired businesses, we absolutely move them into the N‑able platform. The N‑able team has literally flown in and done training for our technical team to get them prepared for us to migrate new businesses onto the N‑able platform. I can’t say that about any other vendor that we work with. The team has been really helpful in getting the platform set up in a way that we can continue our M&A journey, and just keep plugging in companies one right after the other.

Today, we have a six-month process that we follow, and by the end of that period, we have all our tool set fully integrated into their service delivery model, so they’re following The Purple Guys’ way.

It’s very orderly and methodical, but it’s also done very quickly because we think the sooner you can get into that position where we’re all doing it the same way, where we’re all speaking the same language, it’s to the benefit of everyone—especially our clients.

N‑able: Is there anything you wish you’d known when you started that you know now?

KC: Well, there’s a lot of stuff. We try to keep a running tally of lessons learned every time we do an acquisition, because you’re always going to learn something. But there’s maybe two key things.

Firstly, learning how to really size up cultural fit. Pre-acquisition, this is the most important thing that you can do. It’s very hard because it’s much more of a gut and feel thing. But what we’ve learned is that with any smaller business, like most of the MSPs we’ve acquired, the people inside that business and the clients who work with that business are very much a reflection of the owner. So you need to very quickly understand who the owner is, and whether they align with the way that you think about the world and the way you think about the client experience. If the answer is no, you should run for the hills, because it’s not going to work. Or at least not without it being a hard slog to get there.

Second on my list would be not to be too set in your ways. We had this idea in the early days that we had our own way of doing things. We had the right secret sauce, and the right recipe. That was a mistake, and we have changed that process. Today, when we go into a company, and before we change anything, we map the client journey through that MSP. And we do this because we want to understand what they are doing. Every time we have done that, we have learned some things that we have taken and put into our process. And ultimately that has helped to make The Purple Guys a better MSP.

N‑able: One final thing. What is your advice to MSPs looking to start on the M&A process?

KC: It’s okay to not do acquisitions and to not be acquired. There are places in the food chain for all types of different MSPs. You have to understand what it is that you want—always begin with the end in mind.

Make sure you know where you want to land ultimately? Do you want to be the guy that’s reporting to a board of private equity people? That can be tricky for a lot of business owners, myself included. I hadn’t had a boss in over 20 years when I made this decision. Not everybody can make that pivot.

Also, if you’re going to be acquired, whether by private equity or a much larger MSP, do your research. Understand who they are, talk to as many people as possible who have done business with them, learn as much as you can, and make an informed decision.

It’s not always about who’s writing the biggest cheque at the end of the day.

Read Some of Our Other MSP M&A Success Stories

• MSP M&A Stories: How New Charter Offers MSPs Another Way
• MSP M&A Stories: How Frendy Is Driving Large-scale Consolidation in Finland

Pete Roythorne is Senior Brand Content Editor for N‑able

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