Converge Technology Solutions (CTS.V) adds its eleventh acquisition in two years, but there’s a method

Converge Technology Solutions (CTS.V) announced today that it has added VSS Holdings, a Northeast based partner focused on information technology solutions, to its growing acquisition list.

VSS brings its customers and highly skilled teams comprised of experienced technology experts, business consultants, and industry thought leaders to Converge’s fast growing platform.

“VSS sales strength in the financial services industry greatly enhances our capabilities in becoming a dominant software-enabled Hybrid IT provider in the New York and Mid-Atlantic marketplace as it builds on the platform we have created there with our previous acquisitions, Essex Technology Group and Lighthouse Computer Services. VSS also brings a level of expertise around managed services that will allow us to continue to drive value with our Converge private cloud offerings to our clients,” said Shaun Maine, CEO of Converge.

Converge is a cloud-based consultancy primarily using Microsoft Azure, but also leveraging the abilities of blockchain technology, to address the business and IT issues that both public and private sector organizations have to deal with on a day to day basis.

“Some of the things we sell you are on-premise—your networks, your firewall, the things that protect your data—but we’re also going to sell you private and public cloud services. Hybrid IT means the stuff you used to buy is up in the cloud as well,” Maines said.

One of the company subsidiaries, Becker-Carroll, handles the blockchain side of their business, and that side is in identity management. Identity management is all about trust, and that’s blockchain’s immutability function excels. Whatever information gets implemented on the blockchain stays on the blockchain when the block closes.

Converge will introduce its software enabled hybid IT solutions, including identity-based enterprise blockchain, cognitive, cybersecurity, resilience managed services, and multi-cloud solutions to existing and new VSS customers. This will add onto VSS’s existing specializations, which range from virtualization, power systems, managed services and end-to-end data center solutions across North America.

“VSS is now poised to deliver a more widely-based platform of services to its customers while still offering its top-of-the-line customer service and white glove treatment to ensure that their business objectives are met or exceeded,” said Robert L. Jernoske, Jr., CEO of VSS.

This company acquisition total is up to 11 companies since September 2017, and any level of non-organic growth like that should give an investor pause. For example, it’s how Canopy Growth (WEED.T) and other weed companies in that sector got so big, and is actually one of the core problems plaguing that sector today.

But unlike Canopy (and others), Converge approached their mergers and acquisitions with a plan:

“We had a three phase plan, where our first acquisition was September of 2017. We’ve now bought 11 companies during that time period. Phase one was about geographical coverage; phase two was about enhancing capabilities and further geographical coverage. They bring us two things: one we’re looking to dominate the New York marketplace, and we’ve got some excellent sales people with some great finance accounts there,” Maine said.

The third phase is scale. Converge’s end-goal is to position themselves as the dominant IT provider in North America, and provide more private-public cloud services to their customers. The company is presently in phase two, according to Maine. Their financial selection criteria for their acquisitions has been right around $100 million in annual revenue, but now they’re ready to go after larger ones as well.

But given that this company’s value proposition involves selling IT services to tech companies, and during an economic downturn tech companies will need to reduce the costs on their balance sheet—how does that bode for a company like Converge?

According to Maine, not too badly:

“If you go back to ’08 or ’09 during that downturn, it was kind of flat-to-up. We probably wouldn’t do the pace of acquisitions, but I’m not as concerned about the kind of spending that we do on the hybrid IT side, especially some of our mid-tier customers. I don’t think we’ll be impacted to the same degree.”

acquisition
Source: stockwatch.com

The effects of their recent M&A haven’t necessarily been reflected by the flow of their stock price yet, but if this company’s trajectory from their latest acquisition round pans out into some serious organic growth, then it could be a good bid.  Only time will tell.

—Joseph Morton

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