Managed and professional IT services player Netrix is acquiring the managed IT services unit of Contegix in a play on geography and product diversification. Roughly a year after his firm led a recapitalization of Netrix, OceanSound Partners’ co-founder Ted Coons takes us inside the deal to talk rationale and trends.
Technology M&A has been one of the hottest areas of activity year to date. This year is already home to the biggest leveraged buyout of a cloud software company ever–Proofpoint’s $12.3 billion sale to Thoma Bravo in April. CoreLogic’s nearly $6 billion buyout by Stone Point Capital and Insight Partners and Cloudera’s $5.3 billion sale to KKR and Clayton, Dubilier & Rice are a few other examples of a tech buying spree.
And while special purpose acquisition vehicle activity has leveled off over the past quarter, dealflow will likely remain robust: active SPACs are disproportionately targeting TMT assets, Mergers & Acquisitions previously reported
The deal gets Netrix exposure to the medium sized enterprise market in which few managed service providers operate and customers pay for value, unlike large enterprise facing markets where margins are squeezed, Coons said.
The transaction also gets Netrix a deeper managed service provider product portfolio. “From a product portfolio perspective, we are focused on developing a stronger IT service management capability for Netrix’s customers,” says Coons, “And this acquisition continues to enhance that.”
The deal is also a play on cloud services. Netrix already has public cloud capabilities; adding Contegix’s private cloud will help Netrix provide a hybrid offering in which clients manage applications in a private environment, but can access the public cloud as well.
As businesses continue to transition communications and operations from physical premises to the cloud, Netrix is in a position to benefit from the tailwind, Coons said. Organic growth at the company is already in excess of 25 percent, he noted.