MSP M&A Stories: How Frendy Drives Large-scale Consolidation

Consolidation can be a challenging way to build out an MSP, but it can give you the scale to build out the services you need. It can also be incredibly rewarding when you see your vision resonating with your chosen market. We talked to Mikko Peltonen, CEO, of Finnish MSP company Frendy about how a twist of fortune turned a few conversations into a €60 million-plus MSP business, and the secrets to making a merger of that size work.

N‑able: Tell us about Frendy; how did the company evolve?

Mikko Peltonen: How we started is actually quite a nice story. There was a group of entrepreneurs in the Finnish MSP space that knew each other well. They would meet up now and then to discuss things like market trends, and the key areas that they needed to cover in the future to remain competitive and support the SME market—such as cybersecurity, cloud transformations etc.

The group also discussed whether they should do this by themselves, and risk re-inventing the wheel multiple times, or join forces and build one company, where they would be able to offer everything SMEs needed in order to tackle the evolving IT landscape.

This last part remained a discussion topic, until in 2020 some lucky charms came into the picture and a Nordic-based private equity company, called Procuritas, contacted one of the group, as they were looking to understand what the MSP market was like in Finland. Procuritas was interested in business services in general, and had seen this quite fragmented market that it thought could offer some interesting opportunities to build up a company via M&A.

When Procuritas initiated this discussion, other members of the group of entrepreneurs were invited to join the discussion, and it just grew from there. Once the group shared it’s vision of the future and where the MSP market was going with Procuritas, that was the kick off for the Frendy story.

Of course, 2020 was all about Covid, so all these meetings happened via Teams. Yet, despite this it started to build up, and by spring 2021 all the pieces were more or less in place.

N‑able: How did you decide how to structure the new company?

MP: I was brought in in early 2021, as Procuritas felt a driven CEO with M&A experience was needed for this kind of consolidation. At the same time, Procuritas had initiated a thorough strategy process with the group before we actually executed any acquisitions.

This strategy process was the glue that really brought the group together. We talked through all the topics for our big picture strategy; addressing key question like: where are we aiming for? how are we going to get there? what are the customer demands? and how are we going to answer all those demands?

From here we went on to focus on the operating model: did we want to stay as a group of small companies, maybe with different brands, or were we going to be one company that could serve customers across Finland? We made a very clear decision that were going to build one company. We knew that it wouldn’t be an easy route, and would require a lot of hard work to merge different systems and offerings, but we saw it as the key to really ensuring we could provide the modern IT services to our customers that they needed today and in the future.

In fact, we have been very successful in building our cybersecurity offering and cloud transformation themes etc. These could have been big bottlenecks for a group of smaller companies to build by themselves, because they would have struggled to find the scale.

N‑able: When did you make your first acquisitions and how did you handle the acquisition process?

MP: We officially acquired the initial group of 12 companies in June 2021 and then started to go into more detail around our plan of how to build the one company, which was around €30 million and 170 people at that time. We have grown quickly since then, and as of today we have acquired 18 companies and Frendy has a combined revenue of around €65 million and some 350 employees.

While any new companies brought in are integrated into the Frendy brand and processes, we do integrate best practises from companies when we see them. This was always the plan from the start, we wanted to understand which of these companies had solved a best practise way of providing certain services, and would then bring those into the Frendy process.

Of course, it’s not just about systems and process, when you merge companies you also merge cultures. We are kind of a melting pot for different cultures and I cannot say that we have a thorough one Frendy culture yet, but it’s developing at a solid pace.

N‑able: Before Frendy did you have a technology background?

MP: Before Frendy I was CEO of a company involved in engineering and construction, and had taken them through a rather big transformation. But prior to that I was an investment banker, specifically working as a corporate finance advisor for M&A. So basically, M&A is what I know very well. I had also advised companies in the IT services field in Finland, so I knew the market. I knew the dynamics. I knew the value creation levers.

When it boils down to detailed systems and processes, such as how to produce these services, and what technology to use; I know that we have the competencies, knowledge, and understanding in-house to make those decisions within our management team and wider in the company.

N‑able: Is your growth strategy all about acquisition?

MP: No. With Frendy, it’s not only inorganic growth, we have also grown organically and continue to focus on that as well. We have deliberately chosen our battles in terms of where we want to grow, and it’s especially on the MSP side—going for recurring services to customers.

I love being involved in sales of our business and I really want to understand the customer’s point of view. I’ve purchased IT services myself in my previous roles before I joined Frendy, and I have seen different technology offerings. The biggest issue I faced was when the sales reps made it too complicated and spoke technical jargon.

I would say that the whole Frendy story is resonating with SMEs in Finland, and I’m happy to see our strategy coming to life in our market.

N‑able: So you’ve brought processes together. Does that also mean that you standardize on operating platforms as well?

MP: Yes. And this is, of course, where N‑able comes in. Many of the companies we acquired already used N‑able—especially N‑central—for device management, but not all of them. It has been quite the migration project bringing all these companies together to a single platform which allows us to get the visibility into networks and devices across all our customers. We’ve been very happy with N‑able’s support in helping us do this.

Although our understanding of N‑central is at quite a high level already, this size of the migration meant we’ve needed support from N‑able. Having a dedicated Partner Success Manager (PSM) at N‑able has made it very easy for us to get that support, and to get it quickly. Our PSM has definitely helped ease our team’s work at this end.

N‑able: What would your advice be to MSPs that are looking to grow through M&A?

MP: Two things: communication is the key, and that the devil is in the detail.

For a successful M&A, the most important thing is to have open communication with your staff. The more the merrier. Even if you don’t have anything to communicate, you can say again what you said last week. Say that nothing has changed. Everyone’s eager to understand where they are in any big change transformation. What happens to me? What happens to my team? What are the opportunities? What are the threats? These questions need to be answered all the time. They need to be answered from the top of the company as a general communication about what is happening, but they also need to be communicated at the supervisor level to ensure people won’t assume anything that is on the on the negative side.

The other key area of communication is to customers. When customers hear that a supplier is being acquired, it can be a very big question mark for them. They also need to know what is going to happen, and how this is going the affect their services? Customer account managers have a critical role to play here to communicate to customers what is going to happen, and this of course again needs to come from inside the organization.

Throughout the whole integration process, communication needs to be very thorough. This is key to both staff and customer satisfaction. Keeping both these stakeholders happy during a process of significant transformations is critical.

And then my other point that the devil is in the details. Although from a helicopter, MSP services look alike, they aren’t at all when you jump into the details.

Whether it is how the ITSM system operates, or how the services are produced and handled, even small changes can have a big impact on the people in the organization. Staff should be educated in these changes, and this training should be followed up all the time so that the new ways of working become rooted in the organization. As long as any old processes/ways of working remain in the new organization they will continue to cause problems.

N‑able: Is there’s anything else you’d like add?

MP: Yes, the whole reason for M&A at Frendy is our customers. Acquiring new skills allows us to provide wider and deeper services to our customers in the future. We see M&A as a tool that helps us build our skill set to better cater for our customers’ needs now and in the future. That’s our goal, and M&A is the toolset that allows us to do that.

A good example of this is our acquisition of a company called CloudNow this spring. That was very important piece to our puzzle on our journey to provide customers with better services and better know how when it comes to moving their businesses to the cloud.

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: Taking The Purple Guys to a $60 million-plus Business

Pete Roythorne is Senior Brand Content Editor at N-able

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