After making its first acquisition in the form of Total Computers in January this year, York-based MSP boxxe has significantly boosted its growth strategy, says CEO Phil Doye (pictured), who has his sights set on hitting the elusive £1 billion figure over the coming years.
The public sector reseller boxxe, with revenues of £440 million in 2023, views its acquisition of Total, a corporate-focused counterpart with £90 million in revenues, as a significant enabler to accelerate its growth.
“We hope to surpass £500 million organically this year, continuing our trajectory of organic growth. Additionally, with Total Computers, we anticipate an added revenue boost of approximately 90 million,” he says. “Therefore, our collective goal for the year is to hit £600 million as a group.”
“We want to get to the £1 billion mark at some point,” he emphasises, adding that it's clear, even without redaction, that if its “revenue reaches between £600 to £650 million this year and we maintain our current compound rate of growth”, it won’t take long until it reaches that target.
“Our focus for this year is to lay down a solid foundation that will foster the same level of organic growth in Total as we have seen in boxxe,” he adds. “To initiate significant organic growth from that business, which I believe is achievable, another key area for growth we've identified is our services business.
“We have substantially expanded our services business. Despite Total's overall smaller revenue, their services business surpasses boxxe's in size. This gives us the critical mass needed to accelerate our growth in the services sector.”
With the scale added from the Total acquisition, the move sees 220 of Total’s employees join boxxe and adds exposure to the corporate segment, an area where boxxe has previously faced challenges in establishing a significant foothold.
“Our progress in the corporate sector hasn't been as strong as we'd like. Total brings to us about 2000 active customer accounts, predominantly in the corporate space, from the mid-market to enterprise level. This presents us with a significant untapped potential to deepen and broaden our sales within their customer base.”
Total customers will now benefit from boxxe being a Microsoft Licensing Solutions Partner (LSP) as previously they have had been unable to engage on their Microsoft Licencing Agreements. “We see this as a tremendous opportunity for growth,” Doye says.
Total merger boosts boxxe’s scale
He also believes Total's deep partner relationships add value to boxxe’s existing ones, as they involve different partners and different levels of engagement.
“For instance, being an Apple Authorized or Lenovo Platinum partner is a notable example,” he says. “Additionally, we have partners who are particularly focused on solutions. By merging our businesses, we gain more scale, which enables us to advance to higher levels of partner certification. This merger is beneficial as each of us brings unique and valuable partners to the table.”
The importance of being able to manage across a wide range of partners is critical for boxxe, he says. “We've got a group of partners, that by being together, we can leverage them more. Cisco would be a good one on that. But networking is probably an area where both need to do more in.=
“Together, we gain access to a larger network of resources, presenting us with a chance to expand. Considering the significance of cybersecurity, our focus on security and SoC (Security Operations Center) services positions us well for growth. We believe that by targeting key customers, we can effectively expand our SoC and cybersecurity business.”
In any integration effort boxxe undertake, Doye says it's crucial to preserve and enhance its customer relationships. This inherently involves making sure the firm’s sales teams are fully engaged and committed.
“It's essential to ensure a seamless and positive experience from our sales team, through to our customers, and extending to our partners. Maintaining the health of this is of utmost importance.”
He views acquisitions as a means to expand the customer base and a potent growth strategy but emphasises that they must supplement and enhance boxxe's existing services.
“For instance, numerous buy and build strategies exist, where a particular business plans to acquire five or six service companies in a single year and merge them. Since this mostly involves recurring revenue, the need for tight integration is less pressing. The goal is to amass as many as possible for critical mass.
“The reason we haven't pursued specialist acquisitions is that, before Total, our customer base wasn't broad enough to guarantee leveraging a high multiple and high price specialist acquisition across our customer base.
“However, our approach to acquisition differs slightly. We view acquisitions as catalysts for growth. We aim to ensure that an acquisition doesn't just add 'X', but rather it acts as a foundation for accelerated growth. This rationale underpins our avoidance of costly specialist acquisitions.”
Future acquisitions and remaining independent
Nevertheless, the company plans to explore acquisitions again in the latter part of 2024. "Acquisition is certainly on our agenda. We have not undertaken one previously before Total, and acquisitions present a complex challenge. It involves not only learning but also adapting to it alongside a new team.”
He believes the crucial measure is to maintain customer base and retain people. “The priority is, first and foremost, to ensure you keep your customers and your best people. This immediate focus is on ensuring that Total's excellent team and their valuable customers are keen to remain with us as part of the combined group.
"The challenge lies in making sure that the merged group embodies the strengths of both companies. It shouldn't be a boxxe dominated world; it must represent the best of both organisations. Total will integrate into the boxxe trading company over time and that's our intention.
“It's likely that it will be closer to the latter part of 2024 before we consider pursuing another acquisition. However, I would be surprised if we didn't engage in more acquisitions, possibly towards the end of this year or in 2025. This is, of course, barring any opportunistic deals that come our way which are too advantageous to turn down.”
However, he maintains that as the company expands, its status as a fully independent entity places it in a more favorable position compared to adopting buy and build strategies with private equity.
“They [a private equity funded firm] will always be at the mercy of their private equity partner. They might end up in a situation, not due to any fault of their own, where they need to be moved on. So, while I am a strong advocate for private equity, for our current situation, its absence allows us to be significantly more effective in how we progress.
“As we get larger, the possibility of financing all its future acquisitions may become increasingly uncertain, but we want to remain independent for as long as we can. Recognising that at some point, our ambitions may mean that I can't finance it any longer. Our ambitions might be bigger than the amount of money I've got to spend.”
M&A value creation
Doye is of the opinion that for MSPs to succeed in a Merger & Acquisition (M&A) transaction, it's crucial to create value by realising synergies between the parties involved in the deal.
“I think you've got to be very selective,” he says. “You've got to be very clear about now you're going to get value from that acquisition. And you've got to be incredibly focused on making sure it delivers what you said you wanted it to deliver.”
