Managed Services Acquisition: Konica Minolta Buys All Covered

For the fourth time in recent days, a managed services provider has been acquired. And this appears to be the biggest deal yet: Konica Minolta Business Solutions U.S.A. has acquired All Covered, a national IT service provider with 350 employees. The deal, completed in December 2010, was announced today. Here are the details, including insights from All Covered President Todd Croteau and Konica Minolta COO Rick Taylor. Plus, thoughts on how Konica Minolta will attempt to balance is channel partner program and All Covered ownership.

Let’s cover the nuts and bolts first – then MSPmentor’s speculation and perspectives. According to a prepared statement:

Executive Interviews

All Covered has 22 offices across the United States. Konica Minolta plans to run All Covered as an independent business and All Covered will retain its brand. All Covered’s 350 employees will be retained, and Croteau will run the business unit. “We’ll be a subsidiary; we’ll keep the All Covered brand and logo,” said Croteau during a phone call with MSPmentor today. “This is not a consolidation play. All employees are coming over.”

Konica Minolta acquired All Covered as part of an ongoing strategy to “make the transition from a hardware-oriented model to to a services model,” added Taylor. “We identified All Covered as our number one [potential acquisition] target over the summer [of 2010].”

Taylor sees opportunities to push deeper into the legal, education, and health care verticals. Konica Minolta claims to serve 100,000 U.S. businesses directly, and 100,000 through the channel. “That’s 200,000 potential clients for All Covered to reach,” asserted Croteau.

The Plan: Buy More MSPs and VARs

Moreover, All Covered will maintain its strategy to acquire more regional VARs and MSPs. In 2010, Croteau had stated that All Covered hoped to acquire as many as 50 solutions providers over the next few years.

To get a better feel for Croteau’s vision check out this FastChat Video, recorded in September 2010:

Original Investors Exit

Still, Croteau’s expansion plans may have been too lofty for All Covered’s original investors. In recent weeks, MSPmentor had heard rumors that All Covered’s investors wanted to exit the company because growth was proving more difficult than originally expected.

During today’s phone interview, Croteau dismissed the rumors but confirmed All Covered would have needed to raise more money to maintain its aggressive M&A strategy.”We’ve had a great group of investors since 2000,” said Croteau. “They put an awful lot of money into the company 10 years ago. We weren’t going out of business or cash poor, but to get to the next level we would have had to raise more capital. This was the best solution. We had multiple suitors, and we decided on this type of play mid-year [2010].”

Added Konica Minolta’s Taylor: “We’re not disclosing the purchase price but I will say All Covered produces profits and cash flow. Now, we’re going to invest to grow. We’ve got a recipe for success. This wasn’t a fire sale.”

Looking ahead, Croteau expects All Covered to make “even more [acquisitions], even faster.”

Channel Conflict?

Meanwhile, Konica Minolta will need to work hard to avoid channel conflict — especially as Konica Minolta channel partners potentially run into All Covered representatives across the U.S. “Managing channel conflict is what I do every day,” said Taylor. “Todd reports directly to me as does most of the services organization. We’ve built a reputation in this business for handling [the channel] fairly.”

Industry Consolidation

This is the fourth noteworthy MSP-related acquisition announced this week. The other deals included:

So much for a quiet year on the M&A front.

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