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In a play to bring several technologies under one roof for SMBs, a private equity firm acquired data protection vendor Datto Inc. and will merge it with IT management provider Autotask Corp.
Vista Equity Partners Management entered into a definitive agreement last week with Datto, which launched in 2007 and is based in Norwalk, Conn. The merger will create a company that includes professional services automation, backup and disaster recovery, networking continuity, file sync and share, and remote monitoring and management. Datto and Autotask, which is based in New York, sell their products through service providers.
"We're both growing. We're both profitable," Datto Chief Revenue Officer Brooks Borcherding said. "The expectation is we're investing in growth."
Datto backup to integrate with Autotask
The Datto backup product line and Autotask's IT management suite are complementary, Borcherding said.
Datto offers a range of data protection, including business continuity and disaster recovery, cloud-to-cloud backup and ransomware protection, as well as managed networking. Autotask's services include IT business management, endpoint management, file sync and share, and cloud services. Autotask also has an endpoint backup product.
The combined organization has about 1,300 employees with offices in nine countries. Datto and Autotask's 13,000 customers service more than 500,000 SMBs in 125 countries.
Vista Equity Partners has the world's largest software portfolio for a private equity firm and brings "a significant amount of wisdom and expertise," Borcherding said. The firm acquired Autotask in 2014.
Patrick Burns, vice president of product management for Autotask, said to expect integration and innovation, such as trending analytics and automated workflows.
One of the first steps is the integration planning. There's an opportunity for integrating Datto's business continuity and Autotask's endpoint backup, Borcherding said.
"Datto had gotten some good attention as a first to make a splash with ransomware detection," Robert Rhame, research director of backup technologies and storage at Gartner, wrote in an email.
The combined company, though, will need to figure out a way to boost the presence of Datto's cloud-to-cloud backup technology. Datto backup moved into the cloud-to-cloud market in 2014 by acquiring Backupify, one of the first vendors to protect data created in software as a service (SaaS) applications.
"SaaS backup is not a cash cow right now as, for example, about half of Microsoft Office 365 customers are trusting that their data is safe with the service provider and not doing external backups of any sort," Rhame said. "This problem of trusting the provider is even more apparent if we look at the fragmented state of what other SaaS offerings vendors support. In general, there is not wide third-party support for backup of SaaS, and the SaaS vendors do the absolute bare minimum for native backup as a rule."
A 'bet for the long term'
The merger marks a chance for the Datto backup line to grow internationally, as Autotask has a large share outside of the United States, Borcherding said. There is overlap in customers, but the products do not overlap, he said.
For example, Autotask's endpoint backup is complementary to Datto backup and disaster recovery, Datto CEO Austin McChord said in a webinar about the merger Monday.
"It brings a combined scope that's unparalleled," said McChord, who will retain the title of CEO in the merged company. Autotask CEO Mark Cattini will serve as a strategic advisor to the Board of Directors.
Datto and Autotask are both strong brands known to managed service providers (MSPs) and the combined entity will need to pick a company name, but has not settled on a new one yet, Burns said.
Brooks Borcherdingchief revenue officer, Datto
Borcherding said they are not looking at real estate consolidation at the moment unless it's obvious, such as two offices in the same city.
"Having local presence is critical," Burns said.
In response to a question about employee status, Borcherding said the merger is not a cost-cutting move.
McChord said he has personally invested hundreds of millions of dollars in the combined entity.
"This is a bet for the long term that we're going to be able to build some really differentiated stuff down the road," McChord said in the webinar. "MSPs are going to need to have a suite of different things to provide the solutions that really matter."
McChord said he does not anticipate pricing changes at the moment.
A Vista Equity Partners representative was not available for comment.
Datto and Autotask are not disclosing terms of the deal, which is expected to close by the end of the year.
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