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News

February 25, 2019 |

ConnectWise Acquired by Private Equity Investor Thoma Bravo

The deal gives the iconic managed services software maker access to capital and business expertise it needs to realize ambitious strategic goals, according to founder Arnie Bellini (pictured), who will step down as CEO.

Managed services software giant ConnectWise has agreed to be acquired by private equity investor Thoma Bravo LLC.

Terms of the transaction, which is expected to close on Thursday, have not been disclosed.

In conjunction with the deal, Arnie Bellini, who founded ConnectWise 37 years ago, will step into an advisory role. Jason Magee, who became the company’s president and COO in January, will replace Bellini as CEO.

A pioneer in PSA software, as well as the integrated product suites that increasingly dominate the managed services software landscape, ConnectWise was the last major provider of line-of-business applications for MSPs fully owned and operated by its founders, rather than private equity investors or holders of publicly traded shares.

Based in Chicago, Thoma Bravo has massive investments in managed services software and service providers, including ConnectWise competitor Continuum, which it purchased in June 2017. It also owns Barracuda Networks Inc., which bought the Managed Workplace RMM platform from security vendor Avast Business earlier this month, and holds a stake in SolarWinds and its SolarWinds MSP subsidiary.

ConnectWise says that Thoma Bravo views the ConnectWise acquisition as a “standalone platform investment,” and has no plans to merge the company with any other vendor it owns. Continuum, Barracuda, and SolarWinds are also managed by different Thoma Bravo funds with different investment horizons, strategic plans, managing partners, and boards.

According to Bellini, Thoma Bravo’s management expertise and investment capital will allow ConnectWise to pursue ambitious long-held goals faster and more successfully.

“It will accelerate our strategy,” he says. “A big opportunity requires big moves, and there is a big opportunity out there for our partners, and we want to help them get to it.”

That opportunity includes the exploding market for high-margin cybersecurity services and the proliferation of subscription-priced, as-a-service technology offerings beyond the core network and endpoint management most MSPs concentrate on today.

“Managed services is just the tip of the iceberg,” Bellini says. “All of technology is being delivered as a service. It is a very strong movement that we believe will really transform the way technology is delivered. We want to be on the forefront of that.”

Bellini discussed the rise of the as-a-service IT economy at ConnectWise’s IT Nation Connect conference last November during a keynote presentation in which he also outlined grand aspirations to assemble a comprehensive ecosystem of affordably-priced security solutions supplemented with security tools of ConnectWise’s own. Since then, ConnectWise has acquired security service provider Sienna Group LLC and announced plans to use it as the foundation for a new Cybersecurity Center of Excellence tasked with teaching MSPs to capitalize on skyrocketing demand for security assistance.

Though Bellini has previously committed to investing tens of millions of dollars in further, similar efforts, realizing his complete vision will require more money than ConnectWise can raise on its own. “At this point in time, it’s like the only way for ConnectWise to really get our partners in on all of these additional opportunities is with additional capital,” he says. “We cannot just generate it organically.”

ConnectWise evaluated eight private equity firms with substantial IT holdings before selecting Thoma Bravo. “We didn’t go shop for the highest price for private equity. We shopped for the best partner fit and vision,” Bellini says. “Thoma Bravo was the clear and obvious choice.”

In particular, he continues, the company has extensive experience with software-as-a-service vendors generally and managed service software vendors specifically. It also, according to Bellini, shares the view that ConnectWise’s success depends on the success of technology service providers in aggregate.

“They understand the power of the community, they understand the power of our platform, and they understand the power and the opportunity, more importantly, that our partners have to deliver all of technology as a service,” he says.

Magee was one of three candidates to become the second CEO in ConnectWise history, all of whom Bellini has been mentoring for the past two years. “Jason was the logical choice,” Bellini says, noting that Magee has played a central role in crafting ConnectWise’s recent business strategy as well as planning and executing five acquisitions.

According to Magee, Bellini will be the only member of ConnectWise’s senior leadership team to change roles in the near term. Craig Fulton will remain in place as chief customer success officer and Jeff Bishop will continue to serve as chief product officer, positions they’ve held since January. Arlin Sorensen, meanwhile, will still head up the IT Nation Evolve peer groups organization he’s led since ConnectWise bought consulting, coaching, and peer group provider HTG in January 2018.

Some members of the ConnectWise team will soon be leaving the company, however, in connection with a five-year corporate roadmap developed collaboratively with Thoma Bravo. That plan includes a “consolidation” effort aimed at better aligning the vendor’s capabilities with its needs. 110 employees will leave the company as part of that process, while 70 new ones will join.

“The skillsets that we’re looking for are going to change a little bit,” Bellini says, noting that ConnectWise plans to add more than 300 employees in all over the next five years.

According to Magee, personnel shifts will be the biggest potential disruption for ConnectWise partners in the months ahead. For the most part, there will be little immediate change to existing products, services, and support offerings.

“It’s business as usual in a more accelerated fashion,” he says.

That’s per Thoma Bravo philosophy, adds Bellini. “Thoma Bravo is not one of those companies that comes in with a playbook and is prescriptive. They make an investment and they are investing as much in that management team and that vision and that strategy,” he says. “That’s the reason they invest, is because they like what they see. They want more of that.”

Bellini himself expects to remain actively engaged with ConnectWise, though in a more consultative capacity. “I’m going to be sticking around, mentoring, doing what I’ve always done here,” he says. Magee, however, will be very much in charge of strategy and execution.

“I’m not in the hot seat anymore, Jason is in the hot seat,” Bellini says. “I get to be a senior advisor to Jason, so this is great.”

Founded in 1982, ConnectWise started out as an IT service provider that embraced managed services early in the rise of that business model. The company still owns its original IT business unit, which continues to serve clients in the Tampa, Fla., area. ConnectWise also owns Nemsys LLC, an MSP in Toledo, Ohio, that it acquired along with RMM vendor LabTech Software.

The company became an ISV after recognizing that there was a large and rapidly growing market among other MSPs for PSA software like the system it had developed internally for its own use.

That first step into software sales broadened over time through the acquisitions of LabTech, quoting software maker Quosal, and remote access software maker ScreenConnect, among others. Eventually, ConnectWise began selling its various holdings as a single integrated product called the ConnectWise Business Suite, which has been backed by a unified reporting structure and org chart since 2015 and a unified set of brands since 2016.

Other managed service software makers have constructed similarly wide-ranging portfolios in recent years, including Kaseya Ltd., Datto Inc., SolarWinds MSP, and fellow Thoma Bravo property Continuum.

Kaseya has been owned by private equity investor Insight Venture Partners since 2013, while Datto has been owned by private equity investor Vista Equity Partners since December 2017. SolarWinds, which was previously owned by Thoma Bravo, has been publicly listed on the New York Stock Exchange since last October.


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