Legal Perspectives in the MSP M&A Landscape

Legal Perspectives in the MSP M&A Landscape

Shoot the Moon
Shoot the Moon
Legal Perspectives in the MSP M&A Landscape
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Episode Transcript:

Mike Harvath  00:04

Hello, this is Mike Harvath with this week’s Shoot the Moon podcast, broadcasting live in direct from Revenue Rocket world headquarters in Bloomington, Minnesota. Revenue Rocket is a premier M&A advisor for IT services companies. And we’re thrilled today to have a special guest joining us in addition to Matt Lockhart and Ryan Barnett, our partners here at Revenue Rocket. Brad Gross, M&A attorney extraordinare for MSPs. Brad, welcome.

 

Brad Gross  00:35

Thanks, thanks. Good to be here, guys.

 

Mike Harvath  00:38

So today, we’re gonna talk a little bit about, you know, sort of the legal process as well as kind of getting deals done. And we’re gonna fire a few questions, all of us here at Revenue Rocket – Matt and, and Ryan, and Brad and kind of get a feel for, you know, his expertise and talk a little bit about where we’ve touched base and in kind of done deals in the past and then talk more about getting deals done. So Matt, maybe we’ll turn it over to you start.

 

Matt Lockhart  01:10

Sure. And, and we are thrilled to have Brad on the program today. You know, we met Brad, because we were advising a client that did an acquisition of a firm, where Brad was the representative for the firm that was acquired. And you know, I think we can all pat ourselves on the back that we were able to successfully get that deal done. And everybody was thrilled. And the process was actually really, really efficient. And so, you know, when we heard that Brad also did some podcasting. We thought it’d be a great opportunity to to collaborate here. But hey, Brad, you know, why don’t you give us a little bit more of your background, how you got into this space? And you know what you do? And, and I know that you got a bunch of expertise and history here.

 

Brad Gross  02:09

I appreciate that. Thank you. So yes, we did have prior experience together. So that’s a, that’s a great thing, right? You can always gauge somebody based on real life experience. That’s what you want me to do. My background, in 60 seconds or less, is I started out as a computer hacker at the age of 11. And I became a lawyer many, many years later The path between hacker and lawyer was an interesting one. It started out in the DA office up in the Nassau in New York and as well as in Miami Dade, Florida. And I was representing technology companies when I went into the civil end of things outside of criminal law. And I’ve been doing that for about 20 years. And the benefit, or the the true value that I bring in my firm brings to any transaction is that not only do we understand the players in the industry, since we’ve been doing this so long, we understand the technologies as well. So the underlying technologies that are being used by sellers and being acquired by buyers are are things that we’re not only familiar with, we’ve been familiar with them for years. So that helps, right that that helps when you’re involved in a deal where the assets are not just unknown quantities, or fungible items, but they’re actually services or products and so forth, that, that we have a great deal of familiarity with. And so we have been representing both buyers and sellers, depending on the deal in the MSP space for well over a decade. And really looking forward to chatting with you guys about it today.

 

Matt Lockhart  03:57

Well, that’s awesome. Ryan, you know, is our sort of moderator extraordinare. So, you know, Ryan, why don’t we jump in and talk turkey?

 

Ryan Barnett  04:09

Absolutely. And Brad, thanks for being on here. Today, I’m going to take a just a step back a little bit and just understand from hacker to lawyer is fascinating. Transition. And to put that in a technology field is something that you can put some passion and expertise to work. And I’m wondering, is there something in when you think about a deal in an m&a transaction with MSPs it has there been a common thread that is looped deals together or some perhaps even a an interesting challenge that that you’ve seen over and over again, or even just the people that you’re dealing with it are typically this information technology professional and and people that are really trying to help to the best of the clients. So just generally what’s your what’s your impression of What a managed service provider is in why that’s a little bit different in that why that specialty matters when it comes to the legal side?

 

Brad Gross 05:09

I’ll tell you going back. Now, let’s say 20 years ago, or so, the type of transactions that we’d see in the m&a space when it came to technology, were largely corporate players discussing corporate deals. And the technology was sort of ancillary to it. The the players, the people negotiating the deals that were actually involved really didn’t understand the technology, they didn’t have much interest in technology. To them, it was a fungible kind of thing. And so it was more of a corporate experience, as the industry has evolved, and now we’re bringing it back to let’s say, as recently as today, what we’re finding is that the players involved in the transaction in the contract negotiation process, actually are involved in the technology solution itself, they may have selected the solution, they may have worked with the solution, they may have contributed to the solution, whatever it is, so that the players are now not just dealing at a corporate level. But in fact, corporate is very often taking a backseat to the technology. What is it? What is the solution considered here acquired? How is that going to help certain industries, certain market verticals, and so forth? So I guess you know, what I have seen the industry, how it’s changed. And if there’s a common thread is that it is changed, in that the players have become much smarter, and more involved with the solution that they are buying or selling, depending on what side they’re on. And the thread that links them is exactly that. They have the common knowledge, and it goes beyond just a corporate existence. It’s now solution oriented. And that’s a really good thing. I think that it makes for better deals, it makes for more solid deals, it manages expectations better. So I think that that’s where that’s the common thread that I see right now.

 

Ryan Barnett  07:13

Yeah, it’s interesting. So if you if you take a Corporation and a that’s an IT department, perhaps even merging with another company that has an IT department is, is much different than what we’re seeing in that this IT service provider from a third party perspective, doing it on behalf of their clients, I’m guessing that has to lead these MSPs are integral parts of the client’s business. Without them, there’s they’re not having the daily information that they need, systems that they have. It really ties things together. From a legal perspective does that How often do things like client assignability come up, or the the ability for one contract to go to another? Is that a huge portion of that with MSPs that you may not see with with other type of transactions?

 

Brad Gross  08:05

For sure. So in the MSP space, where MSPs are most often supplying services that they themselves are only resellers of, right? It’s not usually a service they provide directly, instead, they’re resell them. So what we find what you have is that MSPs have contracts with upstream providers. And in any sort of field, whether it’s an m&a deal, asset purchase deal and so forth. Third party consents need to be acquired from those third party providers. And the issue that we see. And we have to counsel MSPs quite often on is that these third party consents cannot just simply be overlooked or summarily dismissed, because very often these MSPs will assume incorrectly, that third party licenses, third party vendor contracts, and even their own customer contracts, right can just simply be assigned or transferred without the consent of any other party to those agreements. And that’s a significant issue. Because not only do our consents often required, but they usually require time to obtain. The MSP has to check up to the other party the upstream provider and explain the situation. The MSP has to reach out to its own customer and explain the situation. So from a timing perspective, it can throw a monkey wrench into transactions unless it’s considered in advance.

 

Ryan Barnett  09:38

Yeah, interesting. And sorry to be a little deep in the woods here on on a question. It’s a it’s a fascinating component, just be the from what we’re seeing. The MSP marketplaces is so integral to the customers. And, you know, this has been a year of transactions. So, you know, Mike, I’d love to hear kind of what revenue rockets done. When we’re talking to MSPs, and, and how, you know, what deals have come up, and just get a general marketplace view, and perhaps where some of the issues that we’ve seen from a legality standpoint, that had been interesting?

 

Mike Harvath  10:15

Well, certainly, you know, it’s been a very interesting year, you know, for MSPs. In particular, we we’ve seen a some certainly a seller’s market. And there’s been some fascinating developments. And I’d love to get Brad’s opinion on as it relates to, you know, the big the big debate, oftentimes, is this going to be an asset deal or a stock deal. And the transaction type has changed dramatically for a variety of reasons. In many transactions that we’ve worked on, predominantly due to the transferability of contracts, and, you know, contracts are a big deal for MSPs, they’re typically multi year, they’re typically, you know, a situation where they have a great amount of value, particularly to specific types of buyers, we’ve seen that in particular with private equity, you know, they value those long term contracts at a at a premium, depending on the percentage of recurring revenue. And so there’s been, you know, plenty of, sort of challenges associated with, you know, should it be a stock deal or an asset deal? And we can certainly unpack that a little bit. Brad, you know, kind of give your opinion about that. And there’s been other things I that certainly have come up and the transactions that we’ve worked on, not only last year, but you know, all the time that have presented themselves? I’m sure, Brad, you’ve seen them all. But, you know, maybe you can just render a few opinions about Well, is it stock an asset? And from a legal perspective? You know, how is that different?

 

Brad Gross 11:57

Yeah, so I’ll tell you, first of all, I agree with you that it has been a seller’s market, for sure. As far as an asset deal, versus a purchase deal, and so on and so forth. Well, you know, asset deal versus a true merger deal. I have seen for the most part in the MSP market, far more asset purchase deals than actual mergers, right. So the difference is the primary difference. I mean, there are always issues with accounting and so on. But the primary difference between the asset purchase deal and a merger is that in an asset purchase deal, the purchaser, the buyer is taking on a known quantity of things, right the purchase assets, whatever they are, and is taking on nothing else, including liabilities on the left, as those liabilities are expressly stated in the agreement. Right, so a current asset purchase deal, we’re buying these assets, they are as far as their physical assets, intellectual property assets contract, that’s accounts receivable, so on, and maybe a few liabilities that are listed. When you have a merger, as you guys know, the acquiring company takes on all of the liability, all of the laundry of the of the company that is acquiring. So it’s a very different type of deal, right? You have exponentially more issues, a greater number of issues related to liabilities, then you also have to think about stock and, you know, how is the stock going to be transferred? How is it going to be merged with the bases of the value is going to be determined, and so on. So I think that in the MSP market, what I have seen a lot of our asset purchase, instead of true merger and acquisitions, because they cleaner, they’re, they’re more precise, they’re simpler, you don’t have to worry about working capital calculations very often in an acid purchase deal. Whereas you do in a merger. You know, it’s just a simpler process. And MSPs I think right now in their zeal to grow, both economically and from a geographic perspective, penetrate other markets and so on. I think that what we’re seeing is they want to go the quick, efficient route, they don’t want to take on liabilities. They don’t want to worry about stock transfers, and so on. I just want to buy your assets, I want to buy your clients, I want the receivables and we’re gonna go from there.

 

Matt Lockhart  14:35

Brad, you just brought up a point that i No matter of fact, we we went back and forth on in in real life, which is, you mentioned that in an asset deal, you know, working capital isn’t, isn’t as much of a concern. I’m not sure. You know, we’ve seen that, you know, we’ve seen that working capital pretty much is included. You know, Mike, you’re the the the expert here. What’s your thoughts on working capital in an asset? An asset purchase?

 

Mike Harvath  15:11

Yeah, you know, what’s interesting is, certainly it all depends on purchase price. But, you know, when we represent a buyer, as an example, even if we’re doing an asset, do we require that the seller leave adequate working capital in the business or to meet the definition of acquiring and going concern? We believe that that number hovers around a working capital ratio one, or kind of a one to one coverage ratio, meaning that current assets equal current liabilities, it’s appropriate that a buyer would want that in the business in an effort to not have to put in additional working capital immediately after acquiring the business. In a matter of fact, over the last 20 years, or almost 21 years here, coming up in q1 that we’ve been around, we’ve transacted all transactions with that view, whether it be a stock merger type deal, or whether it be an asset deal. And we you know, whether we’re representing a seller or representing a buyer, it’s typically typically how we view it and how we’ve transacted deals. And it’s worked out, it’s tended to work out fine. I know, there’s always a lot of ambiguity around working capital, what is working capital? How much is appropriate to be left in? You know, is it appropriate to put accruals into your payables list or not? And, you know, I think in many ways, you know, that’s a, if you’re buying that company, let’s say you’re a seller, you’re buying that company would want that, right, you have to sort of walk a mile in the shoes of a guy that’s on the other side of the table, and realize that, you know, if you were acquiring business, you wouldn’t want to pour a bunch of capital into it, even if you’re buying sort of the assets of that business. Yeah, post transaction, if you’re paying fair market. Now, where this gets a little more complicated is the devils in the details of how much money is actually spent right? On the value and whether the valuation was done assuming adequate working capital or not, because frankly, if it wasn’t, you would discount the offer, and then be prepared to put that additional working capital in to manage the business. Brad, your thoughts on that?

 

Brad Gross  17:23

I mean, I agree with I think that it really depends on your perspective, right? A buyers are going to always want higher levels of working capital, right to help assure that there’s going to be money for the continued operations of the business, right? That it’s acquiring the the I mean, it’s, it’s not just acquiring a desk, it’s acquiring a business, it’s acquiring receivables, it’s recording, its acquire and client contracts, and so on. I get that, of course, from the buyers perspective, and there’s always the ying yang, right, the  seller will argue the opposite, the seller is just going to argue that the working capital should be low or zero, right. So I guess it really does depend on your perspective. And you’re right, we did go back and forth with that a little bit in the transaction that that we worked on, we came to a middle ground.

 

Matt Lockhart  18:22

And isn’t it always about bringing both sides to the middle to actually get things done? You know, and I think that this brings up an interesting point in terms of the difference between the role of an advisor versus the role of legal counsel. And and there’s some gray area here now we tell our clients right out of the get go, we are not lawyers, and we do not provide legal advice. However, you know, the, you know, our history and experience, obviously, there’s a lot of, you know, contract review and set up for negotiation with respect to definitive agreements and, and the like, but, you know, there’s some gray and there has to be some gray area for you to Brad between, you know, providing that legal advice versus what would be considered business decisions.

 

Brad Gross  19:23

No doubt, I’ll tell you when we’re involved in a transaction. We play therapist, we play attorney, we play advisor, right to consultants, you wear a lot of different hats. And the idea is from a legal perspective, obviously, you’re trying to make sure that everything is done in accordance with the laws, okay? From a consultant therapist perspective, however, there’s a lot of emotion that you’re trying to herd, right that you’re trying to gather and control and that can take as much time as the legal very often., you know, I would say that the legal end of things is from my perspective, it’s always the easier part. Right? You know, you told me the deal that you want, I’ll write it up. So it’s legal. That’s not a problem. We’ll write this deal up. So it’s legal. But you have to tell me about, you know, what’s going on – what’s behind what you’re doing here? Is there a culture that you’re trying to preserve? Is there a expansion that you’re trying to engage with? What’s behind it? The legal stuff, you know, make sure the reps and the warranties and so on and so forth are in there, that’s a that’s sort of commonplace for lawyers. But you really have to delve into the emotions and the desires and the goals, both short and long term that makes an effective deal. And any lawyer that only focuses on the legal and doesn’t really delve into what’s behind the decisions, is not really doing the right thing for his or her client. That’s how I view

 

Ryan Barnett  21:07

it, Mike, and I’d love to get your perspective on that. You know, in this kind of goes into, we’ve certainly been on this side of the table in which we find that some lawyers can be a, they can either be a deal maker, or deal breaker. And, Mike, I’d love to get your perspective on kind of that legality versus advisor standpoint in which we oftentimes have to come to blows with legal based on some of the counsel that they’re giving. I’d love Mike, if you have some thoughts and ideas around, what do you see kind of lawyer versus advisor in what is a what is the right tension to have in in an agreement?

 

Mike Harvath  21:55

That’s a great question, Ryan. I think, you know, our experience has been that, you know, most experienced M&A guys, like Brad is here are dealmakers right? There are people that can help get a deal done and provide great advice, legal advice and counsel on getting transactions tied out. You know, our role as an advisor, as an example is much more about making sure that the business terms are negotiated fairly, and that everyone’s on the same page, and that there’s clear understanding and diligence has been adequately done, and that we’re moving forward sort of in making sure that one plus one equals three, then then having our client and really both sides of the transaction articulate intent to their respective legal adviser, so they can work through making sure that these these deals are documented, you know, in a way that makes sense and is legally sound. I think where we’ve seen challenges with, frankly, unscrupulous lawyers at times. And there are some of those out there is when their interest is more in billing than in their client’s interest to get a transaction done. And unfortunately, we’ve had situations like that, even in transactions where the lawyer was on our side of the table, and we were representing the same client. And we’ve had situations where they’re on the other side of the table. And it’s clear and evident that that is what they’re doing. Now, I’m happy to say that that’s a pretty rare situation. It can appear to be that way when you have an inexperienced M&A lawyer, simply because there’s inefficiencies in the process that they’re introducing, or that they have to go research or things that they have to do in order to try to document it. And then there’s just playing the unscrupulous guys that want to run their bill up, because that’s who they are. And you know, like I said before, that is not very common, I want to be very clear about that. That it does happen but it is not very common and it is a bit of a you know, buyer beware market if you’re going to look to hire an M&A lawyer, you know, hire someone who’s a deal maker and someone who’s experienced like Brad and your life will be much easier.

 

Matt Lockhart  24:21

Yeah, to that and then I’ll give you know I’m gonna give some kudos when would love to hear any insights that Brad had in this you know, recent success that we had after you know, what would be considered the first turn of the definitive agreement in which you know, our client provided you know, the first document clean document and then, and then Brad made his marks his “red lines” as they say And we had a, we had advised both our client as well as the acquired firm, that one of the things that we like to do is put the lawyers together on a phone call, and have them reviewing the document together and do that, as opposed to this back and forth of redline, counter redline, strike through, remove, etc, etc. And because, you know, we find, again, you know, when we’re dealing with experienced councils in these areas, that if you can just get them talking to each other, it can be a heck of a lot more efficient. And, you know, that’s what, that’s what we did Brad, and low and behold, it was extremely efficient. Anything you could share about that experience?

 

Brad Gross  25:55

Not only was it efficient, but to get it, it allowed a deal that all the that on all sides, everyone wanted to move quickly and allow it to move quickly. So it was efficient, and it was effective. I’ll tell you, you know, Mike points at a very front of a very good point. And it’s a very frustrating issue for attorneys in this field, in that you will have unscrupulous attorneys from time to time. And that can come in several forms, right, that can come in the form of an attorney that is throwing in all kinds of loopholes and monkey wrenches to make the deal more grandiose than it needs to be. It could be attorneys that overstaffed a deal, right? Sometimes you’ll see an m&a deal or an acquisition deal, it really could be handled by one maybe, you know, one or two attorneys. And suddenly, it has a staff of six or seven on their side, and everyone’s chiming in. So and when you get into the red lining process in the back and forth, suddenly, the process takes on a life of its own. And the deal is lost in the skirmish shoes that are returning occurring between attorney so happy to say that that did not happen when we’re in the deal that we worked on which you are involved, we do not participate in that type of thing, either. So that’s a good thing. And I would say that, as far as getting the parties together to great idea, it’s a wonderful idea. You know, everyone is bold and strong by email, and by redlining. When you can actually see someone in a in a conference, video conference, and they can, you know, you can look at them and say, This is important to us, or this is something we can get in on and you could read body language and have them talk it out, oh, it’s far more effective, so much more effective, I think the old school way of email back and forth. And, yeah, we’ll put our corrections in a document, you’ll find it in the data room, and so forth. I mean, it’s just an old school way of doing things that’s neither efficient, nor as effective as it could be.

 

Ryan Barnett  28:09

Is that it’s great to hear both perspectives on this is as we all want to get a deal done, or understand. And we do want to see the pitfalls and legality issues that are brought forth. But I would say that sometimes a five page agreement can be just as good as a 60 page agreement. And in some, in some cases, and having the appropriate documentation and legal counsel is can really be something that helps people get through a deal. I think there’s fatigue all around. And at some point, everyone kind of hates each other. And that’s when we know what the deal is about, but about to get done. I would love to ask a kind of a little bit of a specific question, but it gets a I also want to transition into a topic we’d love to cover which is, in general, you know, what is the most important parts of a deal? But before I get into that, I love Have you seen Brad, any difference in a strategic deal versus a PE or financially driven deal? So anything on the legal front? That’s been interesting,

 

Brad Gross  29:23

I’ve just seen far more strategic deals these days. You know, from a legal perspective, it doesn’t really change the way I approach a deal or the agreements that we’re drafting. I’ve seen far more strategic deals these days as MSPs are becoming wiser to the fact that they need to expand and geographically they need to differentiate their solutions that they’re offering. And so deals now are less about the profitability and the I mean, of course, they have to be a profitable deal. Otherwise, why are we doing it right? But it’s less about the money that’s on the table, but the moments and more about the long term strategic relationships that are going to be built, and the customer and market penetration that’s going to result. So I’ve seen a lot more of that in the past few years, for sure.

 

Ryan Barnett  30:24

Very interesting. Yeah, we deal with a bit of both. And I think when we try to piece together a deal, we go back to our Trinity, which is there has to be cultural fit, strategic fits, and then kind of financial fit. I think one element of that is that it does craft it together in a structural fit when it comes to merging entities. And that’s where putting together articles in a definitive agreement starts to become very important. And I’d love to maybe start eating off at the revenue rocket team manner, Mike, feel free to jump in here. But before it gets to the the fine points in the legal portion, what’s a what’s a critical part of a, of a definitive agreement? In perhaps, Mike, you’re great at answering this is a part of a definitive agreement with it had the most pushing and shoving that guys like Brad can help get through?

 

Mike Harvath  31:23

Well, certainly, there’s the, you know, logical components around working capital, which we already talked about, that’s always a discussion that’s always in negotiation, and usually comes up in the definitive agreement, if we try, even if we try to shape expectations up front, tends to be fairly late in the process. You know, certainly, there’s all the great work that lawyers do in negotiating reps and warranty coverage on deals on behalf of their respective clients. And, you know, there’s times when certainly we’re involved in helping to bridge that gap around, you know, what really is the reps and warrants in the agreements? And are they reasonable, based on you know, all of the components of the agreement. And then once the requisite hold backs, oftentimes, there’s natural hold back to protect a buyer against reps and warranties that the seller is making. And, or there’s other ways to have remedies in the event that there’s a, you know, future litigation or challenge to a reps and warrants violation, I would tell you, however, that as much time is spent on getting those right, which is critically important, I can’t think of a deal we’ve worked on, and we’ve worked on, certainly hundreds of them over 20 years, that has involved a challenge to reps and warrants post transaction. And I think, you know, that’s probably a testament to you know, just doing thorough diligence and making sure that these documents are actually crafted properly. So that you don’t run into a situation where you, you know, have a have a violation, or you, you know, present a situation exceptionally rare to have reps and warrants become an issue. Oftentimes, employment agreements become, you know, a little bit of a sticking point, whether someone is a seller sticking around as a contractor employee, and what their note, you know, what they’re kind of their non compete language, oftentimes, that’s quite a negotiation point that needs to occur in and around a definitive agreement in order to get a deal on people who are selling their business only be locked out from, you know, particularly if they’re younger and not going to be retiring and don’t want to be locked out of the industry, they want to be able to come back in and maybe work in the industry within a reasonable period of time, even though they’re selling and, you know, those documents are flavored, of course, by whether an owner of a business is what we call selling in or selling out, right, they’re selling in and they’re gonna be part of something bigger, you know, then oftentimes those negotiations become more material and meaningful. If they’re selling out over a period of time, they’re dealing with an orderly transition, let’s say it’s more of a contractor type of arrangement, then maybe they’re not as much a sticking point. But, you know, I’d be interested in Brad’s point or opinion or Matt or Ryan know, you can speak to this based on your own experience. And once you guys have certainly seen become sticking points and definitive agreements, Brad?

 

Brad Gross  34:38

Sure. Well, I’ll tell you, wow, you just covered the gambit there. So that was that was fantastic. As I’m thinking, Oh, well, how about this, you covered it, you sort of hit everything from due diligence to reps and warranties to employment. I would say that one of the things that I thought about as you were speaking, oh, this is a good point to bring up because it sort of blends The employment issue, like you said, Sell in or sell out with the financial issue. And that is earnouts. Right now, earnouts always are related to the purchase price, right? Pricing is always a factor, is it? Is it a cash deal? Is it a cash with an urn out? Is it a stock deal, let’s say and so on. But most often, there’s some sort of earn outs. And sellers, of course, need to remember that burnouts are going to be linked to the success of the company, post transaction, right? That so if you get if you’re selling, you’re getting in or now, if the company does well, then earnouts are going to be paid. But very often, if the company doesn’t do well, then in the definitive agreement, earnouts might be delayed or terminated at some point, right? So this gets into the question of whether a seller should stay involved in the business selling, right? Or, if so, what happens if the seller is no longer in the business? Like, for example, the seller begins as an employee selling in as Mike just put it, it’s a great way to go. Great, great phrase, and then leaves is fired. Right? What happens to the ernet? What happens to the business? Is there a relationship between the earn out and the success of the business while the sellers involved as opposed to if the seller isn’t there? And that gets you into questions of well, what if the seller wanted to be there, but the buyer fired him? Right, without a cause? Just fired up? Now what? Well, now the business is going to go down, the internet’s going to go down is how do you handle that? Right. So there are a lot of these issues that involve pricing, burnouts, employment, and they’re all linked together. And I think that, at least in the deal that we did, a lot of that, in fact, I’m going to say virtually all of it, any issues involved, helping those, that paradigm were resolved, because we all sat down and literally face to face and talked it out. So I think that that’s an important issue and something that sellers and buyers need to be thinking about.

 

Ryan Barnett  37:16

You know, go ahead.

 

Matt Lockhart  37:18

Well, I was just gonna say and reinforce and so, you know, this, is this just super, super important is that doing due diligence effectively, in the context of getting a deal done, right? Versus disqualifying a deal is, is just absolutely critical to enabling an efficient, you know, definitive agreement process. Right. And, and Brad raised it, Mike raised it, but it’s, and that’s quite honestly, the reason that you want to have experienced advisors, you know, alongside you, and that’s both, you know, firms like revenue rocket, as well as that legal counsel that that brand provides.

 

Brad Gross  38:10

Agreed, I think that due diligence is one of those things that the parties always, always underestimate. And it is advisors like you guys that will step in, and remind them that, hey, due diligence is not only important, it’s going to take longer than you think it will, right, it’s going to be more involved than you think it will. And you help manage expectations of the parties. That is a big part of the deal. And it’s, it’s a great job that you guys do.

 

Ryan Barnett  38:46

Well, in a lot of what you talked about here today, you’ve talked a lot about everything from your background as a young IT guy, all the way through doing deals with MSPs. And I’ve heard you talk a lot about technology and how important it is with other portions of the larger business. I’d love to hear from you, Brad, you know, why would you? If someone’s considering a lawyer and they’re running an MSP today? What’s going to make? What should they be looking for? So they can feel comfortable with finding representation for their MSP? What What should I be asking the lawyer?

 

Brad Gross  39:27

Yeah, no, it’s great question. You know, the MSP industry is a very peculiar industry, different than virtually any other type of industry. It is. It is a combination. It’s a hodgepodge of resold services is as well as products and services that the MSP itself originates and offers, it involves licensing it involves IP, it involves so many different aspects and it is becoming Ubik quiches. So, it’s not only a complex kind of industry that that involves technology. It’s becoming more and more seen, understood, and use. So all of that said, I think that when an MSP is searching for an attorney, whether it’s us or anyone else to help it with a transaction, such as this, first and foremost, you have to look for a firm that understands the industry. Okay? This is not an industry treat in which a firm should dabble, right, you’re not going to do we do tax law and real estates and wills, trusts and estates. Oh, and we also represent technology companies in the SP space, that is a peculiar combination that probably shouldn’t be avoided. So I guess the first thing I would say is, look for a firm that understands the industry, the technical analogies involved, okay. And then the second, and probably one of the most important things to remember is, it’s the lawyers job to get it done, to get the deal done. Get it done in accordance, obviously, with the law, get it done to satisfy the client’s short and long term goals. But at the end of the day, you’re there to get this thing done. You’re not there to be an obstacle, you’re not there to be a wall. Okay. And so, clients, when they’re evaluating law firm should look for lawyers that have that attitude, you want to expand great, you want to sell wonderful want to sell in, sell out. Sounds great, tell me what you want to do, we’re going to get it done for you. So that kind of can do get it done attitude, combined with the knowledge of the industry, are the two main factors, I think that you really need to look for, in an attorney or any counsel in this space. Wow, that’s

 

Matt Lockhart  41:51

awesome. Brad you know, and to just sort of build upon that getting it done, and getting it done efficiently, enables the parties to then, you know, effectively start to integrate, and they, you know, they they’re building trust with each other, you know, if it’s this battle, right, who feels good about that? And, you know, you’re going, oh, man, now what do we do? Right, and so, it, it, that’s just awesome. Counsel, Brad, so, you know, kind of that summarize, here, the MSP marketplace is, is growing in importance, you know, to the people are recognizing the value of the services being provided, because they everybody is just relying upon the technology to drive their businesses and make them competitive, and these MSPs that, you know, are integral to that. And so the industry is, is only becoming more and more important layer on security. And it’s just that much more important. It’s a very active space, you know, it’s no surprise, but it is just extremely active. There’s a lot of money that’s been arrested in in the MSP managed services, provider space. But then there’s just a bunch of strategic opportunities, as Brad talked about, he’s seen more and more strategic deals being done. And, and, you know, so it’s just great, it’s a great place to be. You see founder led businesses that have the, you know, they’ve just been tremendous successes, and those founders want to see deals being done, or their, their firms being acquired by other respectful firms. And, and, and so, you know, kind of lastly, to get all that done, you got to work with people with experience, that understand the space, and then again, have this intent in helping companies come together. Right. And so, you know, Brad, we can’t thank you enough. Now, if I remember correctly, Brad, you’re going to be doing some speaking here very soon to the MSP community. Tell us about that.

 

Brad Gross  44:15

Thanks. Yes. So I’m going to be speaking at a number of events I just got back from speaking at the IoT SSA event I’ll be speaking because say this event in Las Vegas in about what is it now about a week or so as well as connect wises events in Orlando in November, and then will be a road show to be announced through 2022, which will be going to about nine different cities, talking about the issues relevant to MSPs transactions in which you’re involved with customers, m&a, purchase agreements, and so forth. It’ll all be covered during that time. So they should check in and be happy to give them the updated schedule. as it arises,

 

Matt Lockhart  45:01

Well you better let us know about that to Brad because yeah, we’ll do. Yeah. Well, we’ll we’ll certainly amplify. How do people get in touch with you, Brad?

 

Brad Gross  45:11

If they want to reach me? Easiest way for information would be to send an email to info inf o info at Bradley gross comm they could visit the podcast, which I call the technology broadcast, not podcast, but broadcast. Because I am very clever like that. That’s a technology broadcast comm or give us a call 954-217-6225.

 

Matt Lockhart  45:39

I love the Bradcast. That’s great. We’re gonna need to check that out as well. Hey, Mike, how do we how do we wrap this up here?

 

Mike Harvath  45:48

Well, big thank you to Brad again for your expertise and sharing that with our audience. We look forward to continuing the conversation at a future date, maybe on one of these events. As Brad mentioned, you don’t learn how to get a hold of him. Likewise, you can find more information on our website. We’ll put a link to Brad’s resources on our website, revenuerocket.com And with that, we’re going to tie ribbon on it. Thanks to all for listening, and have a great week.



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