Episode 258: Look Inside the MSP Acquisition Journey with Orrin Klopper

Meet Orrin Klopper, the CEO of Netsurit, a thriving Managed Service Provider (MSP) firm with a remarkable journey of growth. Under his leadership, Netsurit has evolved into a $40 million enterprise, boasting a team of over 100 professionals. What sets Orrin apart is not just his impressive business acumen but also his commitment to fostering a unique company culture. He's the driving force behind the globally awarded Dreams program, an integral part of Netsurit's aspirational ethos. As a Microsoft Partner, Orrin has successfully orchestrated three acquisitions, further solidifying Netsurit's position in the industry. What truly sets him apart, however, is his resilience and determination, shaped by his childhood experiences of attending nine different schools, with a few detours along the way. With a track record of turning challenges into opportunities, Orrin's story is both inspiring and emblematic of the entrepreneurial spirit. GROWTH FOR MSPs In the world of Managed Service Providers (MSPs), growth is the ultimate goal. Many MSPs strive to expand their businesses and reach new heights. One strategic approach to achieve this growth is through acquisitions. But for entrepreneurs looking to sell their MSPs, the decision to join a larger organization like Netsurit isn't just about the deal; it's about finding the right fit and value proposition. In a recent podcast interview, Orrin Klopper, CEO of Netsurit, shed light on what makes Netsurit an attractive option for MSP owners considering the next chapter in their journey. NETSURIT’S CRITERIA Netsurit has a specific set of criteria for MSPs it considers for acquisition. These criteria help ensure that the acquired MSPs align with Netsurit's strategic goals and culture. Here are the key criteria: 1. Leadership Retention: Netsurit places a high value on retaining the key leaders of the MSP being acquired. 2. EBITDA Range: Netsurit typically targets MSPs with EBITDA ranging from $500,000 to $2-3 million. 3. Recurring Revenue: A minimum of 60% recurring revenue in the MSP's business model is a crucial criterion. 4. People-Oriented Culture: Netsurit values MSPs with a strong people-oriented culture. A harmonious and engaged workforce is essential for continued success and scalability. 5. Microsoft Expertise: Netsurit is predominantly a Microsoft-focused business. MSPs that have expertise in Microsoft technologies and serve clients with similar technology needs are a strong fit. THE VALUE OF EQUITY Orrin emphasized that Netsurit's approach to offering equity as part of the deal isn't just a benefit for the seller; it's also a strategy they themselves embrace. This alignment of interests means that Orrin and his team are willing to roll over their equity when the time comes for Netsurit to have a liquidity event (such as bringing in a private equity partner). This underscores their commitment to protecting the culture and essence of the businesses they acquire. CHOOSING THE RIGHT PRIVATE EQUITY PARTNER Orrin acknowledged that this decision is not to be taken lightly. When determining the suitability of a PE firm, Netsurit considers various factors: 1. Alignment of Values: Netsurit looks for a PE partner whose values align with their own culture and philosophy. 2. Performance Track Record: A PE firm's track record in terms of achieving return on investments (ROIs) and managing portfolio companies is a crucial factor in the selection process. 3. Cultural Fit: Maintaining the soul and culture of the acquired businesses is paramount. Netsurit seeks a PE partner who shares this commitment and isn't solely focused on rapid change and cost-cutting. 4. Long-Term Vision: Netsurit values PE partners with a long-term vision for their portfolio companies. In the dynamic world of MSP acquisitions and private equity investments, Netsurit's journey provides valuable insights. The careful consideration of deal structure, the recognition of the value of equity, and the selection of the right private equity partner all play pivotal roles in the success of these endeavors. As the MSP industry continues to evolve, these strategies and insights will remain essential for companies looking to thrive in this competitive landscape. • • • FOR MORE ON ORRIN KLOPPER: https://www.linkedin.com/in/orrinklopper/ https://netsurit.com/en-us/ Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast. If you want to start getting yourself deal-ready, check out the DealQuest Podcast with Corey Kupfer each week. Featuring industry leaders and newcomers as guests alike, the DealQuest podcast has something for everyone.