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Entrances, Exits

Once upon a time there was a small merger that was completely off the radar and it worked.

Heartland Technology Solutions was established in 2003 through the merger of SCCI of Harlan, Iowa and Connecting Point of Joplin, Missouri. The parent organizations were both established in 1985. HTS acquired Beacon Micro of Ames Iowa in 2003.

Heartland Technology Solutions is the founding company and every other company bearing the name or a variant thereof in all these different locales forms a sort of mini-conglomerate called Heartland Tech Group (HTG).

You've never heard of HTG but Heartland's story is a unique one in that it shows how a small company can expand.

The HTG group, according to CEO Arlin Sorenson, pools its experience and technical "know how" along with partnerships with "like-minded companies," in pitching and deploying its managed IT service offerings to and with clients.

There's a key lesson to be learned here for VARs, MSPs and break-fix tech firms: Don't rule out partnerships, formal or otherwise.

Some IT service companies have the vision to expand and the clientele to serve but not the cash to execute grand plans.

Conversely some firms have done well and are cash rich but have no idea how to enter new markets.

Enter possible mergers and acquisitions (M&A). As mentioned in this Web cast, most M&A activity won't make the large financial press but deals between SMB and small enterprise scale companies happen all the time, particularly in the IT Services space.

There have even been cases where an SMB client, looking to leverage a customer base in its own industry vertical using a non-traditional way. For instance a large doctor's office purchasing an IT service firm, specializing in healthcare IT services is not uncommon.

Sometimes expansion comes not just through technology acquisitions but through deals that make sense, according to Mike Harvath of Revenue Rocket.

"Every business owner in IT services has choices to make when growing their firm," said Harvath. "There's investing and building organically and through an acquisitive strategy. The bases for these deals involve key components: strategic and cultural components and financial sense, does this make sense?"

The key thing to remember here is that thinking long-term doesn't always have to include profit and revenue forecasts or what are the latest cool gadgets and tech architecture. Sometimes it's simply a matter of personal goals, knowing when to get in and when to get out of a particular strategic market or even your own business. Both MSPs and their client companies should be aware of the funding opportunities existing in mergers, acquisitions, strategic partnerships.

"Clearly there's a move in the VARs and MSPs to develop a services competency and sometimes it's through deals," Harvath said. "The key thing is to distinguish between a product and a service competency and how the two combine or don't mesh. More project based services companies, it's much more about aligning the culture and the expectations."

It's something to consider especially in this economy. If the deal is right, there's nothing wrong with selling out or selling in, buying in or buying out.

Posted by Jabulani Leffall on August 03, 2010 at 11:57 AM


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