Tower Arch Capital will announce later this morning a majority investment in Intelligent Technical Solutions, an IT services provider headquartered in Las Vegas.
The deal for undisclosed terms includes a recapitalization with the management team, which includes CEO Tom Andrulis, chief revenue officer Dan Izydorek and chief experience officer Rob Schenk. Founded in 2003 and headquartered in Las Vegas, ITS provides managed IT, cloud, cybersecurity voice over IP, phone and fiber internet services to small- and medium-sized businesses across the US.
Andrulis and Tower Arch partner Aubrey Burnett spoke with PE Hub in an exclusive interview about why the Salt Lake City PE firm likes the managed service provider sector and the strategic growth plan for ITS.
“We had become interested in the managed service provider space about 18 months ago and have been proactively looking for a platform investment in the sector,” Burnett explained. “This industry has a business model that has a lot of qualities we really like, providing essential services to small businesses that tend to be non-deferrable, reoccurring in nature and growing in demand.”
He noted that the firm “struggled” to find a “good platform, business, and entrepreneur we mesh well with.”
The firm first met Andrulis a year ago.
“This is a business with nice, overall industry tailwinds that promote organic growth, but you can really accelerate the scale and size via acquisition,” Burnett said. “One of the reasons we thought Tom and ITS and their platform was so attractive, was not only were they interested in pursuing M&A going forward but they had a good track record and experience already of identifying acquisitions and integrating them successfully with a really unique skill set among MSPs.”
Burnett added that he believes ITS has a great runway on which Tower Arch can accelerate over time.
“I don’t think any business is recession-proof, but we always want to find investment opportunities – regardless of where we are in the cycle – which are critical services to businesses and consumers, and we think the MSP space is well positioned,” Burnett said.
Andrulis added that ITS has been growing through an acquisition strategy the last five or six years and will continue to do so.
“We just completed a deal a few weeks ago and have four more that should be completed this year, so lots of strong momentum there,” Andrulis said. “On the organic growth side, I see things shifting more towards the security angle for most clients. Cybersecurity is a hot topic, and we continue to improve our cybersecurity services throughout our client base, and I think that will be the biggest driver of growth going forward.”
When asked about how ITS is handling the talent shortage plaguing many companies across industries, Andrulis responded: “On the talent side, in the US, it is challenging but if the culture is strong in the company than that goes a long way,” he said. “We have also made a big push to shift some of our labor outside of the US, so we are able to draw from a bigger talent pool and look for talent anywhere in the world.”
This is ITS’ first PE deal, so finding the right firm to partner with was key.
“I have fielded dozens of calls and emails from PE firms, and the biggest thing with Tower Arch and why it was the best fit for us, was in terms of culture,” Andrulis said. “We are big on internal culture, and that is a big piece to get right if MSPs are looking to partner with a PE firm.”
“Tower Arch has been patient, and I am impressed with the work they put in and the level of professionalism they showed throughout the process,” he added.