Private Equity MSP Deal: GTCR Golder Rauner Invests in IQNavigator

GTCR Golder Rauner, a private equity firm, says it is investing in IQNavigator, which specializes in vendor-neutral managed service programs.

This is the second time in less than two weeks that a private equity firm has pumped money into an MSP-focused company. And it’s the latest deal to land on our MSPmentor M&A Tracker, our fast-growing list of mergers, acquisitions and investments across the MSP landscape.

Here’s more on the GTCR-IQNavigator deal, and the three-act play that I expect to see as the MSP industry both expands and consolidates.

IQNavigator should not be confused with a traditional small business MSP. Rather, IQNavigator develops a platform — part managed services, part software as a service — that allows big companies to more effectively source, procure, manage and measure their indirect services. The company’s customers include Northrop Grumman, Shell and Sony Electronics.

GTCR (www.gtcr.com) says it currently manages more than $8 billion of equity capital investments. The company did not disclose how much money it pumped into IQNavigator.

This is the second private equity deal this month in the MSP space. The other deal involved Wachovia Capital Partners pumping money into HostMySite.

Act II

Star Wars creator George Lucas says every good drama is a three-act play. (Now you know why the guy loves trilogies.)

In the case of managed services, the first act was discovery. We learned about the key platform players and we saw some early successes.

I’d say we’re moving into the second act: Where MSPs begin buying up one another, private equity firms open their wallets, and MSP platform providers begin testing the IPO waters.

I don’t expect this second act to end until late 2009 or sometime in 2010. Some MSP platform providers, after all, will delay their IPOs until financial markets show greater strength.

The second act, by the way, usually ends with great drama and a cliffhanger. In this case: Perhaps an unanticipated merger, stock boom or bust.

Act III

We’ll need a third act to sort out all of the Act II deals. We’ll get closure as newly combined MSPs begin to execute their strategies, and traditional software companies iron out their SaaS and MSP partner programs.

We’re moving deeper into Act II right now. Mergers, acquisitions and IPOs will continue to accelerate through 2010 or so. It’s going to be quite a ride before we get to Act III.