‘We will do another 20 or 25 roll-ups this year. This latest acquisition makes 29 acquisitions for us. And so thinking about 25 acquisitions in 2024 is not crazy. Realistically, if we take out the last two months where we didn’t make an acquisition, we did those 29 in like 14 months. We’re gluttons for punishment.”

Managed service provider The 20 MSP Thursday, possibly the most prolific acquirer of fellow MSPs in the industry, unveiled the acquisition of its 29th MSP since the company’s founding in 2022.

Tim Conkle, founder and CEO of Plano, Texas-based The 20 MSP, told CRN the pace of his company’s acquisitions will increase going forward.

“We will do another 20 or 25 rollups this year,” he said. “This latest acquisition makes 29 acquisitions for us. And so thinking about 25 acquisitions in 2024 is not crazy. Realistically, if we take out the last two months where we didn’t make an acquisition, we did those 29 in like 14 months. We’re gluttons for punishment.”

[Related: MSPs And Private Equity: What Makes An MSP Stand Out From The Pack?]

The 20 MSP is part of The 20 MSP Group, also founded by Conkle. The 20 MSP Group is a consortium of MSPs who use a common set of tools and a common help desk, and serve as a pool of potential acquisition targets.

The 20 MSP’s latest acquisition, the managed IT services division of Detroit-based Data Tech Café, is the second in that city after a smaller acquisition there in 2023, and triples The 20 MSP’s client base in the city, Conkle said. Data Tech Café serves clients in multiple states, he said. Data Tech Café was a member of The 20 MSP Group.

While The 20 MSP in previous acquisitions looked at expanding to new geographic areas, the acquisition focus going forward will be more on scaling in geographies where it already has offices, Conkle said.

“Data Tech Café is about five times bigger than the one we bought last year,” he said. “And so we’ll end up slamming them together, and now we start to get scale. So going forward, you’re gonna see us start to focus on economies of scale. Maybe we don’t need two offices, just one. Or maybe instead of five high-end project guys, we need four. And so you’ll see a start doing some strategic stuff around the idea.”

That doesn’t mean The 20 MSP will give up on new geographies, Conkle said. The company in March expects to make its first acquisition aimed at giving it a footprint in the Boston market, he said.

“I think, as we strategically move forward, you’ll see us making strategic buys as far as geography goes,” he said. “Now you’re also going to see us do some strategic leadership stuff. Why? Because as we grow, we have to create national leaders and regional leaders. And I would say that some of our best leaders, not at the top level but one level below at the VP level, have come from the acquisitions we’ve made. We’ve been really, really lucky. We’ll continue to push that narrative, either strategic from a geographic standpoint or strategic from the team that we get.”

Data Tech Café is a really good and growing company, Conkle said. While two of its three current owners will pursue opportunities elsewhere, the third, CEO and Founder Seann Moreno, will remain with The 20 MSP as a strategic part of the company going forward, he said.

“Seann brings some skills that I think are really going to help us in a couple areas,” he said. “He brings leadership to what we call the Midwest region at a little bigger scale than what we have there now. Now we have really good owners in the area who have taken over national project teams and things like that, but I see in Seann a natural operator for that region. He also brings a really good team with him.”

Data Tech Café, as a member of The 20 MSP Group, is already fully integrated into The 20 MSP, Conkle said.

“For instance, they have no helpdesk people because all their helpdesk functions have been done by The 20 MSP ever since they joined the group,” he said. “And so an acquisition was a natural next step for them.”

As The 20 MSP continues to increase the pace of acquisitions from the membership of The 20 MSP Group, The 20 MSP Group is tightening the requirements it looks for from new prospective members, Conkle said.

The 20 MSP Group plans to maintain its membership at between 125 and 150 MSPs, and as The 20 MSP makes an acquisition of a group member, the group will bring new members in, he said.

“If you go back to the beginning, anybody could join The 20 MSP Group,” he said. “That’s long gone now. So the opportunity for people to just raise your hand say ‘I want to be in,’ that’s gone. Now, it’s very strategic. Obviously, we’ll take in a small MSP if it has the right leadership. The right leadership will grow it, especially when we give them all the tools. But just a group of people singing Kumbaya, we’re no longer that. We’re, we’re maturing very fast.”

Funding Via Bank Loans, Not PE Or VC Investments

The 20 MSP does not have venture capital or private equity backers, but instead funds its acquisitions with loans from its long-time banking partner, Dallas-based Sunflower Bank, which it has worked with for years, Conkle said. The 20 MSP also recently signed on The Woodland, Texas-based Woodforest National Bank to syndicate loans in conjunction with Sunflower Bank, he said.

“We have no equity in this company that’s owned by anybody except me and the owners we’ve rolled up who’ve reinvested back into The 20 MSP,” he said. “Which makes perfect sense. Everybody has skin in the game. So then the next question is, how did you finance this? Regular banks, for all intents and purposes. Not mezzanine debt, not VC money, not PE money, but good old traditional banks.”

It is an unusual way for MSPs to do business, Conkle admitted.

“What kind of blows people’s minds is, regular banks don’t give MSPs this kind of money,” he said. “You have to be special. You have to be big. You have to have your ducks in a row. And you can’t leverage as much. Which means we’re not under the strain that most companies are. They go out and get mezzanine debt, where the interest rates are real high. We use traditional banking, which is the lowest interest that you can get anyplace. But you have to be really, really good. And the bank has to understand. You have to you have to tell them the story. And they have to say, ‘Oh, that is good.’ And that’s what’s happened. I’m telling you that The 20 MSP is a one-of-a-kind unicorn in this industry.”

While interest rates in general are currently high, borrowing from the bank is still cheaper than getting external funding, Conkle said.

“Now, I’d love to tell you the exact interest rate,” he said. “But we can’t based on NDAs and stuff like that. But I can tell you this: If you have a good relationship with a really good set of banks, you get the lowest interest rate that’s out there. We’re not like a typical high-growth company where we have no cash flow. It’s actually kind of cool. You have to stay at covenant with a bank, which means you have to have so much money on hand you have to you know. It’s not like a typical fast growth company where they give you money and you’re burning through it. We’re very, very profitable.
And when you’re very, very profitable, people like to help you get to the next phase, and they like to help your dream come true. That’s the easiest way to say it.”