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A managed IT service provider with nearly $1 billion in revenue could emerge from the pending acquisition of Pomeroy, based in Hebron, Ky., through a private equity-backed rollup.
If the pending transaction -- announced today -- goes through, Pomeroy will combine with Tolt Solutions, a managed service provider (MSP) with a retail industry emphasis in Taylors, S.C. The transaction depends on a handoff, of sorts, between two private equity firms: Platinum Equity LLC, which owns Pomeroy, and Clearlake Capital Group L.P., which includes Tolt Solutions in its portfolio of companies.
The pending deal has two components: Clearlake has signed a definitive agreement to purchase Pomeroy, as well as back the melding of Pomeroy and Tolt Solutions into the Pomeroy Group of Companies. The companies did not disclose the terms of the transaction, which is expected to close in the fourth quarter.
The Pomeroy Group is expected to become a platform upon which additional acquisitions may be layered over time, according to a source close to the transaction. The source said the combined company would look to expand its customer sets in core markets, such as retail, healthcare, state and local government, and financial services. The new company would also look to provide cloud services to its accounts, the source noted.
The Pomeroy deal is hardly a watershed event in a market segment that has seen plenty of merger and acquisition activity in recent years. But Pomeroy's private equity support is notable as a vote of confidence in the managed IT service market.
Charles WeaverCEO, MSPAlliance
"The fact that they [Clearlake] would back this kind of deal says good things about the health of our industry," said Charles Weaver, CEO of the MSPAlliance, based in Chico, Calif.
He said a private equity firm wouldn't put money behind a services provider unless it had solid data indicating that end users are spending -- and planning to spend more -- on services.
"We don't see a lot of IPOs [initial public offerings] or publicly traded," Weaver said. "The next best thing is to see a major deal like this happen."
Managed IT service deal creates a large MSP
The size of the Pomeroy deal also makes it stand out among transactions in the managed IT service space. Pomeroy Group, according to Pomeroy and Tolt Solutions, would have more than 4,000 employees and close to $1 billion in annual revenue. The combined entity's main service lines would include managed services, professional services, staffing services and data center services.
Weaver said the transaction would create a company much larger than the typical MSP.
"It is a fairly large deal," he said, citing other examples, such as Konica Minolta's acquisition of All Covered.
He noted, however, that Pomeroy Group won't be a Pure-play MSP. Few companies are strictly MSPs in this market segment.
The size of the resulting company, Weaver added, could possibly disrupt the upper midmarket, since competitors would face a formidably sizeable managed services rival.
For Pomeroy, the pending deal would mark the second time the company has been acquired by an equity partner in recent years. Affiliates of Platinum Equity agreed to acquire the company, then known as Pomeroy IT Solutions Inc., in 2009.
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