Long Island IT provider presses 'NFL' M&A strategy

Sourcepass Holdings LLC, a 20-month-old East Northport IT company, is pressing what it describes as an aggressive NFL-market merger-and-acquisition strategy designed to bring it to at least $90 million in pro forma revenue  by year's end, executives said.

The company's latest acquisitions, announced in July, were Melville-based Total Technology Solutions and SSD Technology Partners, located in Wilmington, Delaware. Those transactions added 80 employees to Sourcepass, bringing its head count to more than 300.

The Total Technology acquisition was a cash and equity deal, while the SSD Technology transaction was a cash deal. Terms were not disclosed.

The company's "NFL" strategy refers to its internal name for a plan to acquire small IT companies in major U.S. markets, using  the fan-base map of professional football franchises as a rough template, said Sourcepass founder and chief executive Chuck Canton. Initial phases of the plan are focused on the East Coast, where Wilmington is in the Philadelphia Eagles' market while Long Islanders root mostly for the Jets and Giants.

In March, Sourcepass, then based in Manhattan, announced it had acquired another Long Island company, East Northport-based Network Solutions & Technology.

The roll-up strategy of acquiring IT companies serving small- to medium-sized businesses has been financed in part by Manhattan-based Metropolitan Partners Group, which provides short-term loans to businesses.

Sourcepass's pro forma 2022 revenue target of $90 million to $100 million would be more than quadruple its 2021 mark of about $18 million.

The company's services include cybersecurity, cloud migration and web development. Clients include the New York Islanders, the Bronx Zoo and Domini Impact Investments, a women-led mutual fund company.

Canton, who previously served as an executive at Kandy and Vonage, two providers of communication services, said that rolling up companies in the fragmented IT market provides the opportunity to squeeze out inefficiencies.

"Roll-ups work best when savings can be applied to the operations of the acquired companies, and where duplicated costs can be eliminated so in return you are gaining increased purchasing and pricing power," he said. "Additionally, in a fragmented market, in the most successful roll-ups, there is the opportunity of reinventing an industry and being rewarded with higher valuations." 

At the same time, Canton said that when Sourcepass acquires a company, it seeks to retain its culture and leadership structure that are attuned to the local market. 

Canton said that a company like Sourcepass can fly under the radar of global IT giants like Accenture, which serves major multinational companies, while partnering with other companies like Hewlett Packard Enterprise, the 2015 spinoff from the Hewlett-Packard Company that provides servers and storage to enterprise clients.

The company is "constantly looking for ways to continue to grow," Canton said, and would consider a funding round or an initial public offering to raise capital.

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.