TUC is on a tear. The firm is currently at an annual run rate of $45 million – $25 million of it coming from TUC’s March 2012 acquisition of bootstrapped-from-scratch Nitro – and it believes it can get to $100 million by 2015, and perhaps as early as the end of this year, through a combination of aggressive acquisition and franchising. The company currently employs about 100 people, many of them at company headquarters in Kanata. That number is expected to grow to 180 employees by the time the company reaches its nine-digit revenue target.
“$100 million in sales buys you a lot of options,” says Mr. Poirier. “At that point you are a target for a strategic acquirer, you can access public markets if you want to or you can be bought by a big (private equity) firm.”
Possible strategic purchasers include Best Buy, which bought mindSHIFT, or Konica Minolta, which bought All Covered Inc. Those acquisitions came with earning multiples of around 13, suggesting a sale would be an attractive exit for TUC stakeholders.
For the moment, however, TUC’s focus is on becoming the top managed service provider in North America as well as on a possible international expansion into Australia.
There are three pillars of growth for managed service providers such as TUC. First, IT is simply getting more and more complicated and nearly impossible for small businesses to manage on their own.
“The tech guy with a screwdriver can’t keep up with the demand for new tools, cloud-based services, antivirus software, fast (and) secure servers, data backup, sophisticated accounting and Internet telephony,” Mr. Poirier says.
As such, TUC’s ideal client is a small to medium-sized enterprise with 10 to 300 users. Only 10 per cent of its business comes from government customers.
The second pillar of growth is acquiring mom-and-pop managed service providers, or MSPs, that are falling behind in the race to provide the most advanced tools for their clients. TUC and its franchisees can take care of 98 per cent of network needs remotely – without ever rolling a truck.
The last pillar is TUC’s franchising model, which allows entrepreneurs to buy the rights to a territory and then exploit it using TUC’s MSP toolkit.
The company’s growth is partly financed by private equity investments in tranches of $100,000 to $200,000. BMO is also involved. Meanwhile, Stephan May, who was brought in from real estate firm Walton International, is now in charge of raising money to fund acquisitions.
What’s nice about the firm’s acquisition strategy is that each transaction is accretive. This effectively means TUC’s targets are financing their own buyouts, with part of the purchase price being provided by the sellers themselves, conveniently at a cost that is less than their earnings.
It’s a strength that’s complemented by a healthy corporate culture that’s based on three things: a love of tech, a desire for growth and a need to please its customers.
And when it comes to pleasing clients, TUC has a secret weapon: it allows users to click on a desktop icon to see who is available to help them with an IT problem and then choose who they want to deal with. A familiar face remotely taking over their computers and dealing with their issues provides clients with a great deal of confidence in their MSP. It’s IT with personality, and it’s a company-wide priority for TUC Brands.
Professor Bruce M. Firestone is entrepreneurship ambassador at the University of Ottawa’s Telfer School of Management; founder of the Ottawa Senators; executive director of Exploriem.org; and a broker at Century 21 Explorer Realty Inc. Follow him on Twitter @ProfBruce.