MSP M&A Stories: How New Charter Offers MSPs Another Way

If you’re an MSP looking at M&A, there are many different opportunities in the market today. If you’re looking for something that will help you grow your MSP business while still keeping control, James Richards explains why joining a group like New Charter Technologies could provide you with the perfect solution.

N‑able: How did you come to join New Charter Technologies?

James Richards: I’ve been in the IT business with Stronghold Data for about 33 years. Around four years ago I was approached by one of my peers. He’d been in touch with another friend who was speaking with a gentleman named Mitch Morgan, who was a consultant in our space at the time.

Mitch had owned an IT business for many years, and he was putting together a financial model, with a private equity firm called Oval Partners, that would allow MSPs to become part of a larger group, but still maintain their individuality, branding, culture, people, and choices of how to run their business.

I was intrigued by what New Charter, as Mitch was calling the business, had to offer, and ended up flying out to Palo Alto to meet with Oval. We had a great first meeting, but I needed to get some things aligned with my management team to make a transaction beneficial to all the leaders in our company.

It took about a year for us to make that structure happen, at which point we revisited the New Charter proposal, and we became the eighth company to join the group. Today, we’re up to 22 companies and as of last year, I was promoted within the organization to be a Group President over 12 of our 22 companies. So I’m actually New Charter staff now; fortunately I had strong leadership at Stronghold Data that have been able to step up and start running the day-to-day operations.

N‑able: What’s different about New Charter?

JR: New Charter offers a unique opportunity for companies to join a group platform and stay in the game. Our target audience is companies that really don’t want to sell because they still see a lot of horizon for their business, but who need backing in order to scale and grow.

We had great growth at Stronghold Data, but when I did the math on how fast I could grow as a company versus joining New Charter, and the scale we could get from being a part of a bigger group, the numbers just made sense. Through that process we’ve grown our staff at Stronghold Data from 30 people to 43. The promises that were made to us about keeping our culture, running our business, and maintaining our entrepreneurial spirit have all been completely fulfilled.

N‑able: How closely aligned do the individual companies need to be in New Charter?

JR: There are some alignments that we must have in order to truly be a platform company. We’ve got to be on the same financial system, plus we have centralized HR, and recruiting based out of the New Charter corporate center. Stronghold Data as an individual company, never had a recruiting department; we would just use resources like Indeed. At New Charter we have a team of five recruiters who are world class and bring us some of the greatest talent around. It’s amazing having these sorts of resources in house, and the savings are literally multiple six-figures for the whole company.

On top of this we get to pull from the expertise of each of the operating companies. We are lucky enough to have some people that are just spectacular at things like sales process and can be mentors to others that may struggle with that. Other companies have great operational efficiencies that they can share. Being able to pool all these resources and share the wealth of expertise we have across the group, is helping to drive our organic growth in a way that we believe is outpacing the other models considerably.

This set up also means that the Oval Partners and New Charter’s senior leadership team are free to focus on doing all the necessary due diligence when it comes to bringing in net new partners, while the individual MSP owners get to continue to focus on growing their businesses.

N‑able: Is there a process or methodology behind how you bring new partners into the group?

JR: We’re looking all over the market. What you and I are doing today is part of that; it’s about building visibility and awareness. You may run into somebody in this space looking for a way to grow without selling and you can say, “hey, I know this New Charter guy, go talk to him.”

I was invited to the Miami Formula One race by a vendor, and they had maybe eight other MSPs there. While I was there, I happened to strike up some conversations with a couple of guys. One of them has already had a meeting with me and Oval and is very excited about the opportunity.

The deliverables that Stronghold Data has already received over the two years we’ve been involved, and the momentum that I see moving forward, is something that I want to talk about. I would love other people to see the benefits that we’ve received.

And this isn’t just restricted to our business. Each of the companies is seeing similar annual growth to what we’re seeing. We had one company that just blew it through the roof. Last year they were at something like 40% organic growth.

Of course, success comes in different ways for different businesses. We had another company that had a very difficult quarter, but we were able to bring the resources in and help them look at their processes and systems. In the next two quarters after that, they completely turned the business around. The owner was in such a great position because he felt success. This success, and his work, was acknowledged by his peers, which almost brought him to tears. New Charter gives you this family of people that want to help each other succeed, because we’re all invested with each other. It creates a great atmosphere of growth and a great atmosphere to build each other up.

Beyond that we’re going to conferences. We’re trying to be speakers on M&A panels and get the visibility through creating the conversations that we want to see. If somebody shows an interest, there’s no pressure, but we’re always willing to ask, “Is this something you’d be interested in?”.

The market is so hot for M&A in the MSP space right now, and we want to be presenting what we have to offer. There are a lot of different models out there and not every model makes sense for every company. Let’s say you’re an owner and you want to sell your business and walk away and let somebody else come in and run it, then New Charter is not your model.

But if you want to stay in the game and look at an opportunity to reinvest and then an opportunity to get a second bite of the apple later when a larger investor wants to come in and buy a larger group; then we can offer that to you.

N‑able: You talked earlier about standardizing on operational platforms. From a tech perspective, is it fairly autonomous for the individual companies, or do you have a product stack that you standardize on?

JR: When it comes to the true tech stack, that is the operating companies’ choice, and there are some advantages to that. For example, let’s say that there is an exploit that happens on a specific tool, and we’re all on that tool, then we just all got exploited. By having multiple best of breed options, you minimize your risk footprint. Of course, the flip side to this is that if everyone is using the same thing, then you have common knowledge share going across the board, and you can benefit from purchasing power.

We only make one specific requirement in this area and that is that all our companies deploy SetinelOne’s Managed EDR. Beyond that, there are no mandates. But what we do find is that people start gravitating towards best of breed products. Often, for example, our service managers will be talking to each other and one might say, we use this and this is why. Another might then say we used to use that and this is why we quit. This sort of knowledge and experience sharing can be a powerful thing for our business.

N‑able’s Cove has a great story here. The product was presented at our operational leadership team and several guys raised their hands to say they had switched to it and it’s fantastic. Now we have a team looking into it to see how we can use it across the organization. So you get this mentality of if something’s good, it’s probably going to get traction and adoption.

We believe that setting out what they have to use can strip out the expertise of the local business that made those choices, based on what they felt was best for the clients. Pushing away their input like this can lead to your organic growth being stunted. We think it’s very important to maintain the individual operating company’s image and choices. 

N‑able: At the beginning of this process, is there anything that you wish you’d known then that, you know now?

JR: I don’t have anything today that I would have changed. Sure, the industry has come a long way since then and there are more opportunities today, and the M&A companies are doing things differently to be more attractive. Knowing what I know today about the industry, if I could go back I know I would still be signing with New Charter because the model just fits for us.

It has provided sustainability for the local Stronghold Data business. It has given us a lot of investment in the future, and it has brought me together with a group of phenomenal owners as partners. It’s been really awesome to work with all these people; I’ve learned so much.

I think I got a very good value for my business, and my investment was very good.

So, I don’t know how I would do it any different. Other than maybe doing the deal a year earlier!

Read Some of Our Other MSP M&A Success Stories

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