Upstack Buys Agency Business from CA Communications in 33rd Deal

CA Communications has agreed to a deal to sell its agency business to Berkshire-backed Upstack.

The Minnesota-based channel partner and New York-based Upstack announced the deal on Thursday. They are not disclosing the financial terms.

Marc Agar

They shared, however, that Upstack is only buying CA's telecom advisory business. CA also performs hardware resale and managed IT services; those practices will not be joining Upstack. CA CEO Marc Agar will both join Upstack as a partner and remain the leader of CA. Michael Agar, partner at CA, will also work with Upstack.

Upstack has now officially bought 33 business, all of which operate in the technology advisor/agent model. In that model, partners source services and solutions from suppliers to business end users. The suppliers manage the solution, bill the end user and give a monthly commission to the agent/advisor.

Upstack has stated a goal of being the largest customer-facing technology advisor in the world.

Hardware Background

CA fits the profile of a hybrid partner, meaning that it sells both hardware in a resale/margin model and software and carrier services through a recurring commission model.

Upstack has purchased the agency businesses of other hybrid partners, including Sidepath and LinkSource, leaving the VAR businesses to operate on their own.

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Marc Agar came from the hardware world, having led McLeod USA's hardware division. Following McLeod's divestiture of that practice, Agar set off on his own to launch his own telecom hardware agency in 2002. He was selling and installing a variety of equipment, including PBX's, routers and firewalls. At the same time, he wanted to pair hardware resale and services with agent-based internet and phone sales.

“I thought there was just a better way to serve clients out there in the marketplace and have multiple revenue streams coming into your business," Agar told Channel Futures. "Sometimes when you're doing transactional things like hardware, sales can go up and down. But when you're doing things on the agency side, you get reoccurring revenue that helps kind of smooth out those transitions.”

CA initially forged direct agreements with telephone providers; its portfolio evolved to include data center, internet, UCaaS, CCaaS and cybersecurity.

Agar decided, however, roll its bases underneath tech services distributors (TSDs), then known as master agents. On one hand, CA's expanding businesses meant that it was handling back office activities for more and more vendors, and the process was growing ever more complex. On the other hand, Agar said he was seeing the financial risk agents were taking on with direct contracts.

“For whatever reason, we've had some foresight on where the industry is going. And as Qwest started to transition and build up a very formal agency program, every year they would kind of evaluate partners with regards to their 'quota.' We saw a couple of partners locally get their legs cut out from under them. Qwest decided to drop them," Agar said.

Agar turned to Intelisys after he struck up a quick connection with co-founder Rick Sheldon and former president Jay Bradley. He would go on to add Avant as a partner.

Upstack's Chris Trapp

Upstack CEO Christopher Trapp called Agar a "forward-looking" leader." He pointed to Agar's hybrid model and embrace of TSDs.

"He is one of the few entrepreneurs to successfully build a telecom agency and a hardware VAR in tandem. In 2006, he was also one of the first agents to understand and embrace the value distribution in technology services,” Trapp said. “Today, we share a vision for the future of our industry that combines deep expertise, proven processes and technology enablement into a powerful platform that drives greater value for our customers."

Vertical Expertise

Many of CA's stickiest customers come from the senior living industry. Michael Agar, partner at CA, had led a practice in which CA functioned as a general contractor of sorts for developers of senior living facilities.

“It doesn't matter if they're operating in Minnesota, Wisconsin, Illinois, Pennsylvania or Texas. Through our partners we are able to put the same solution in any of those locations, maintain it for them and handle all of the interactions from a new build/construction standpoint," Marc Agar said. "And that has proven to be very beneficial for senior living operators and developers in that space, because they want consistency from one location to the next.”

Why Join Upstack?

According to Upstack, Agar was looking to expand its agency business to the enterprise level.

“We could have kept going on our own and continued to be successful, but there comes a point where you must decide whether you can scale faster with a partner than alone to service your existing and future clients,” he said.

Agar said many of CA's customers have worked with the agency for upwards of 20 years and have done upwards of 10 deals with it. And he said he felt indebted to them to bring them more resources.

CA picked Upstack out of "several options," citing its bench of resources.

“We wanted to partner with the organization with the greatest momentum, resources and financial backing,” Agar said. “It was clear to us that Chris Trapp and the Upstack team were well on their way.”