The Utility Company, TUC—Not What You Think It Is

(This article originally
appeared in Ottawa Business Journal, February 2013:https://www.obj.ca/Opinion/Bruce-Firestone-5444.)

Talking
with Larry Poirier, President of TUC Brands and Founder of Nitro IT Business
Solutions, is like entering a quiet oasis in the storm that TUC Brands is
creating in the Managed IT Services space. TUC is on a tear—they are 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 believe they can get
to $100 million by 2015, possibly as early as the end of 2013, through a
combination of aggressive acquisition and franchising. They currently employ
about 100 people, many of them at company HQ in Kanata. Their head count will
reach 180 by the time they get to $100 million in sales so there is some
scalability in their economic model.

“$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 PE (Private Equity) firm.” Possible
strategic acquirers are Best Buy (who bought mindSHIFT) or Konica Minolta (who
bought All Covered IT Services). Their acquisitions came with EBITDA multiples
of 13 so it’s a pretty attractive exit for TUC stakeholders.

There
are three pillars of growth for MSPs (Managed Service Providers) like
TUC—firstly, IT is simply getting more and more complicated and nearly
impossible for SMEEs to manage on their own. “The tech guy with a screwdriver
can’t keep up with demand for new tools, cloud-based services, anti virus
software, fast/secure servers, data backup, smart d-bases, sophisticated
accounting and Internet telephony,” Mr. Poirier says. Their ideal client is a
small to medium sized enterprise with 10 to 300 users. Only 10% of their
business is from government.

Their
second pillar of growth is acquiring mom and pop MSPs who are falling behind in
the race to provide the most advanced tools for their clients. TUC and its
franchisees can take care of 98% of network needs remotely—without ever rolling
a truck.

Their
last pillar is their franchising model—which allows entrepreneurs to buy a
territory and then exploit it using TUC’s MSP toolkit.

All
of this growth is being financed, in part, by private investment in the company
in tranches of $100,000 to $200,000 in common shares. BMO is also involved.
Stephan May, brought in from (real estate firm) Walton International, is now in
charge of raising finance for acquisitions.

What’s
nice about their acquisition strategy is that each transaction is accretive
which means, in essence, that their 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.

TUC
aims to be in the top MSP tier in North America and are considering
international expansion (to Australia).

Their
corporate culture is based on three things—love of tech, a need to please their
customers and a desire for growth. As far as pleasing their clients, TUC has a
‘secret’ ingredient—they allow their users to right 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.

Dr.
Bruce M Firestone, Founder, Ottawa Senators; Author, Quantum Entity Trilogy;
Executive Director, Exploriem.org; Broker, Century 21 Explorer Realty;
Entrepreneurship Ambassador, Telfer School of Management, University of Ottawa.
Follow him on Twitter, @ProfBruce