VSS Capital makes more than 3x its money on Coretelligent

VSS Capital Partners generated 3x to 4x its money with the majority sale of Coretelligent, after growing the cybersecurity specialist organically and through M&A during its five-year hold, a source familiar with the deal told PE Hub.

The firm’s exit follows an auction process that ultimately produced the $150 million to $200 million sale of Coretelligent to Norwest Equity Partners, the source said.

Headquartered in Westwood, Massachusetts, Coretelligent provides comprehensive managed and co-managed white glove IT support, cybersecurity, back-up and disaster recovery as well as cloud services.

Under VSS’s five-year investment, Coretelligent grew EBITDA more than 150 percent, from roughly $4 million to close to $12 million, the source said.

VSS is retaining a minority stake in Coretelligent because it says it sees more growth ahead for the IT company.

“We think the company has terrific prospects going forward, and there is a chance to even further accelerate growth given the add-on acquisition potential,” said Trent Hickman, managing director at VSS and chairman of Coretelligent.

With three add-ons to date, M&A has already proven a key growth driver. The company, buoyed by its acquisitions, has been growing at a mid-to-high teens growth rate on a recurring revenue basis, the source said.

“The first acquisition of United Technology Group allowed us to expand our operations into the southeast,” Hickman said. The other two purchases, each based in Connecticut, enabled Coretelligent “to further penetrate the hedge fund and family office verticals.”

Coretelligent is consistent with VSS’s strategy of backing founder-led businesses and supporting those founders to “help them take it to the next level,” Hickman added.

VSS, a structured capital firm focused on the lower mid-market, typically invests through a a hybrid model injecting both debt and equity into companies.

Coretelligent also aligns with VSS’s concentration on the IT services sector, as it completed two further deals in the category.

It invested in Centroid Systems, a Troy, Michigan-based provider of managed cloud services and enterprise workload consulting services. It also backed Los Angeles-based QuadraNet, a full-service data center provider offering colocation, IaaS solutions, private cloud and bandwidth services back in 2018.

VSS declined to comment on the deal’s financials or return metrics.