The Purple Guys, an IT services company backed by a Charlotte investment firm, has sealed its sixth acquisition.
The Purple Guys acquired Valparaiso, Indiana-based Golden Tech, a managed IT services provider. The deal occurred after local private equity firm Kian Capital Partners invested in The Purple Guys in January 2020. With its previous acquisition of Accelerate, an Indianapolis-based IT company, The Purple Guys is better positioned to deliver enhanced support and services to the Indiana and Chicago areas, according to the company.
Matt Levenson, a partner at Kian Capital who is based in Charlotte, told CBJ the firm invests in industries that are large, growing and mission critical. He says Kansas City-based The Purple Guys offers outsourced IT service to small and midsize companies that may not be able to afford internal tech resources.
“Companies like The Purple Guys are prevalent around the country to service that market,” Levenson said. “We found this space very attractive. We like to invest in large and growing and highly-fragmented industries and the MSP (managed service provider) space generally fits that to a T.”
Kevin Cook, CEO of The Purple Guys, said the mergers and acquisitions space is a highly competitive market. When the company is looking to acquire a business, it is mindful of the geography and the quality of the team, to name a few factors.
“One of the primary reasons we are growing is acquiring new talent,” Cook said. “The ability to acquire great talent through acquisition is an important reason we're doing some of these things.”
Since 1996, Golden Tech has provided custom-managed IT, cloud, security and consulting services to business owners in the Northwest Indiana and Chicagoland markets. The IT company specializes in small to midsize businesses and has more than 300 customers, connecting people and businesses through technology. Golden Tech’s long-serving staff lends substantial technical expertise to The Purple Guys’ team.
Cook said the MSP industry is early in its consolidation phase. Private equity or outside funding has just started to gain an interest in the space over the last few years, he said. That’s due to MSP businesses rapidly growing and generating significant free cash flow.
“Back when I got my start in IT, we had no recurring revenue,” he said. “You would hunt a new project. You would do the project, and then you would finish. And then you thought, 'Well what do we do next? We got to go find another project.' That world has all changed.”
With the MSP industry evolving, outside money is becoming more interested in growing that space, Cook added.
Kian Capital’s investment strategy is primarily focused around helping companies scale through a variety of growth levers that it can back from the board level, Levenson said. He says scale matters for capability reasons, to better serve customers and for shareholders.
“Because what we're all hoping to do — create shareholder value and enhance that value in the company overtime,” he said.
While there are thousands of MSPs in the U.S., Kian Capital ensures it chooses the right addition to its portfolio, one that will increase value for everyone involved in the deal. Levenson said Golden Tech further solidifies that approach of growing in a strategically disciplined manner.
“We're going to do a number of acquisitions going forward that will all meet that same criteria,” he said. “There's a lot of MSPs out there and the consolidation is happening for a variety of reasons and we're real excited about the future of The Purple Guys.”
Cook said he expects The Purple Guys to close more acquisitions in 2023 and continue to develop its internal expertise. Its latest acquisition of Golden Tech is part of a strategy to become a leading IT service provider in the central U.S. while continuing to improve clients’ productivity through IT support.
The Purple Guys is currently seeking partnerships with founders in the managed IT services space.
Charlotte-based Kian has $425 million of capital under management. Its core industry sectors include consumer, services, value-added distribution and specialty manufacturing. The firm has about 14 active partnerships in its investment portfolio.
