MSP Owners Group: The New M&A Model (EP 858)

Hello friends, Uncle Marv here with another episode of the IT Business Podcast coming at you live from PAX 8 Beyond in Denver, Colorado, continuing with day two. And before I introduce my next guest that is joining me, let me just read a little bit of information that I got this morning in my email. The MSP owners group introduces a unique majority stake acquisition approach that allows MSP founders to sell a significant portion of their building their business, while still maintaining meaningful equity.

I'm going to stop right there. And I'm going to introduce the one and only Juan Fernandez. And I'm going to start with the hard question first, man.

I thought we were friends. How do I got to find this out? Through other people? Oh, my God. You know, I love you, Marv.

I do, man. You know, when we were talking about releasing this news, one of the really cool parts was I told the team, I said, hey, so like, where do you, how big do you want to talk about this? Like, do you guys want to make a small announcement? How do you want to make this work? And they said, let's go big. And I said, okay.

And so here we are, PAX 8 Beyond, and, you know, growing big, one of the things was, you know, hitting some of the big media outlets, and they were like, hey, look, this is a huge story for us. Would you mind not saying anything else? And I think they call it an exclusive to other media outlets. So it wasn't intentional.

It wasn't intentional. I get it. You guys, you know, you had your exclusive people.

And let me say this. I mean, some of those people are heavy hitters. They're greats in the industry.

I think you guys just didn't trust me. That's what I think it was. That has nothing to do with it.

We trust you beyond belief. My friend Taco, I thought we were friends. Oh, man.

You have to take that one off with him, man. That's a lunch ticket right there. You're going to get a free lunch out of that.

But I will say that, you know, as we had intentions to release this at Beyond, the press release did go officially out. The exclusive was on another media outlet yesterday. That had some time to the ween, and then this morning, the official release is out.

So we're sharing with everyone. So MSP Business Owners Group. No, no, no.

MSP Owners Group. MSP Owners Group. Yeah.

Okay. I'm sorry. I was thinking ahead because I've already gotten the questions.

I got hit up in Discord. I got hit up in the DMs asking, Marv, man, do you know what this is? Is this another 20? No. So explain what we're talking about here.

You can put that 20 back in your pocket, bro. I'm not adding it. But I will say that what we're looking at doing, one of the things that I recognize, and again, building and working with MSPs over the years, is I also recognize that there's a challenge.

And that challenge is what I see after they sell. And you know, I talk a lot about the emotional side of selling. I know it because I've done it a number of times.

And I know there's a lot of stuff that comes with that, that people don't, like when you're in a transaction, they don't work with you to go through. And so the challenge on the other side is how people feel about what they just did. Like, how does it, does it preserve your legacy for some of them? No.

They're going to cut the bottom off. The people that they don't need they're going to get rid of. And the company that you built is a shell and it doesn't leave you feeling good.

So we said there can be a different way. And in order to do that, you have to create new methodologies, new financing, new ways of doing things. And you have to approach it differently.

And so we've just flipped the table. One of the platform and the VC companies last night said, you're literally creating an entirely new M&A model. And I said, you're right.

We are. And so that's what we're doing. We're just focused on the success of others and we want them to stay around.

This community is the place we love. You've invested in this marvel. I don't want to see them go.

So trying to figure out how to keep them around. So from what I understand of the announcement and the press release that was out there. So this is something where owners are selling, but they're not selling the entire business.

It's kind of like a little partnership. But it's a collaboration in a sense where the business can get access to centralized operations. Explain how that works.

So one of the challenges of focusing on your business is oftentimes, you know, there's a lot of things we have to learn to get to the point of doing the thing that we love to do. And we know how to do a lot of that. And so we decided like, hey, look, we can take the back end and do all the things that and allow others to focus on the thing they love doing.

And so, operations, finance, sales, marketing, all of the things that we all do as a part of doing the thing we love to do, but maybe not the best. That's what we're doing. And so we're focusing on those things to help the, you know, the owner grow their business and focus on the customer types that they do really well with and really helping them dive deeper and grow that business.

And I want them to see multiple opportunities to earn revenue at a high level instead of at the slow level that maybe some of them might come in at. And so now under the model, as I understand it, there's the option the owner can stay Actually, it's actually a requirement. Yeah, yeah, yeah.

The whole thing here is like in the mast of the ship. The definition of success is a leader that empowers another leader that creates another leader and empowers them. But that definite success is not reached until that leader creates another leader and empowers them.

So this legacy opportunity, success in our business would look like an MSP coming in and then growing their business and then the people in that business running that business. That's success, right? Because then at that point, this leader has created this. We've created a leader that then taught that employee how to lead.

And then that employee is teaching employees how to lead. So we're really focused on building a cultural. So where does the exit strategy come in? So as those things happen, you know, we will look at buying out those segments of business and placing the right leaders in those places.

So they could take another two, three, four potential opportunities in their business to exit at a much higher place than they did. This is not normal. Nobody does this.

Nobody would ever think about it. They would do this and then go do that to your business and then take that revenue and then put it back in their pockets. That's how it usually works.

For us, we're just saying, let's do this together. I mean, that's where we're not setting any doorways or gateways on who comes. It's just, are you willing to help make this place that we call home a little bit better? I also saw that the criteria is not necessarily based on, you know, that P&L statement or that line called EBITDA that everybody looks for in that you guys are actually looking to help people who may not have the EBITDA to sell.

Because I don't think most of the folks, there's a trap, right? It's either you get to some place by doing something or pushing a button or trying to get to a place. It comes at a cost. It's either up front or on the back end.

We're just trying to remove that challenge, right? And I get it. There's like a lot of people that won't ever see this opportunity. And that, to me, bothers me.

I think everyone's worked really hard to get to a place that they should find success. And we don't have that challenge. That's the whole point of me not taking external capital from places that don't like that kind of model because it doesn't make, to them, dollars and cents.

To me, as a culture and a community, it makes a ton of sense. But that's why we're doing what we're doing and helping them grow and scale and then demonstrating what's possible. All right.

So I did mention Paco earlier. And his company is one of the first to join is Prodigy Techs. And then you have a second company, Cool Technology.

So these were all kind of done at the same time of your announcement here. So that's good. Do you have others already that you're talking with? Or how do you expect this to go over the next year? Yeah, you know, the thing for us is demonstrating success, right? So we do have a lot of folks that are very interested.

I mean, we have quite a few, as a matter of fact. And, you know, the thing for us is like, you know, our primary criteria as a team. And again, everybody's in this together is, you know, we're all deciding who we want to be here because, you know, this isn't just me leading the charge, right? Like I named Paco the CEO.

I mean, he's kind of running it, but he's going through that process of that integration. And Chris is taking over as CEO of our financing leasing company that we're going to be launching. So, I mean, we're removing all the barriers to allow success to actually permeate.

But for all intents and purposes, you know, we have an interest form on our website, too, for those folks that are interested and want to learn more. We're happy to just dive into how we do things. And if it's a fit, it's a fit.

And if it's not, it's not. It's not. I'm not trying to get anywhere.

I'm just trying to help. I know that you are one that doesn't jump into things lightly. No.

And that there was a lot of thought behind this. And I'm sure you talked with people about what possible pushback there might be or perception in the industry and stuff. And it looks like you're ready to just push on through.

Yeah. I did. There's a lot of folks, right? I know that this M&A model is disruptive because, you know, there's a lot of people that have sold because they got to an even a mark and they push their business into this place.

And, you know, they have sold their business. I heard a couple of them last night regret that decision and came to me and were like, man, if I just knew you six months earlier, I might feel good about what I just did. And that to me is the moment, right? It's like, I get it.

I know that private equity and all these other companies are going to be fine. They got plenty of cash. Like they can dump it wherever they want it.

You know, for us, I just, you know, thought it was just an opportunity for us to try to make this place just a little bit better. All right. What about the owner that does want to just walk away? Yeah, well, just done.

That's not for us, right? We're not looking for that. Like for the owners that want to walk away, I love you guys to death. You know, for us, I need people to stick around to help this community be better.

Like, I mean, I need to train you and you need to train somebody else. Like that's how this works. And otherwise we just place dies.

There's no legacy behind this if we just walk away. And so, yeah, if they want to exit, I'm happy to help them find some places that are looking for add-ons and other things. But for us, we're more interested in those folks that want to stick around and try to help out.

Okay. Any other bombs you want to drop? I'm used to, I actually usually drop five. So, you know, I don't know that there's any other big bombs.

I think we got a lot of, we got a lot of exciting announcements that are coming out. And so just, you know, we're going to build in transparency and grow and be very vocal about how we're doing it and shifting these folks into this next generation of what we call this, the new era of service providers. And we're really excited to have a lot of folks interested and hopefully we can be a value to the community.

Okay. Last hard question. Oh.

Are you going to like do a money grab and be gone in a couple of years? Yeah. The definition of success is to leave it to the employees. Like that's the whole point about creating a legacy company.

If everybody decided, and that would be a lot of people, that that's what they wanted to do, which I highly doubt would be possible, it'd be vote by committee. And I highly, I don't, nobody that's coming in here is looking to leave. And so for all of my team, that's on the back, every single one of us has been committed to this cause and feel very strongly about, we don't need to leave.

We don't have to take money and run the whole point of how we're setting things up. If people do get to that point where they're interested and they're like, well, I think I'm okay now. Like I've empowered the other leader.

I've defined success, bro. It's like, all right, we'll throw you a going away party. And then you can hang out still for a little while, but yeah, but we're not, we don't need to go anywhere.

We don't have to sell. We don't, we're not in a position that we need to be at that. So I don't, I don't plan on leaving this until the good Lord sends us home.

It's early. I'll come back with some questions in a few months. You know, you'll be, Paco will be the one answering a lot of questions like, hey, so all right, you went through this, man.

Like, how did this work? And that was the beauty of putting him there. If I was going to say that I'm going to do this and then I don't actually do what I say I'm going to do, it's just smoke and mirrors, man. That's why I was like, let's do it right now.

Day one. Let's go. Let’s really build and show what's possible.

All right. I'll be watching. I look forward to listening and I'm going to get some other news sources so I can find out stuff.

Hey, the next time I did say, look, the next big ones will actually share their love with the community because as we get more out there, we want the community to know as soon as possible. No problem. No problem.

Juan Fernandez, MSP Owners Group. And I guess, I guess next time I'll be talking to Paco. And you got to give him the hard questions.

I'm going to give him some more than hard questions. I can't wait. All right, folks, that's going to do it.

Check out MSP Owners Group and secure your future. Plan your exit and do it gracefully. And we'll be back with more from PAX 8 Beyond here in Denver.

We'll see you soon. Holla.