Morgan Stanley is acquiring Fusion Connect as part of a recapitalization and debt reduction move at the MSSP (managed security services provider). The MSSP's overall business valuation was not disclosed.
This is technology M&A deal number 81 that MSSP Alert and sister site ChannelE2E have covered so far in 2022.
Much of Fusion Connect's focus involves traditional managed IT services across on-premises and cloud systems. Originally a telecommunications service provider, Fusion Connect sold off certain assets to Canadian communications provider Distributel in 2021. Earlier, Fusion bought Birch Communications and MegaPath. Fast forward to present day, and the recapitalization announcement heavily emphasized managed security services.
Fusion Connect: MSSP Funding Details
As part of the funding, Fusion Connect raised $55 million in preferred equity and refinanced a $60 million credit facility. The moves will fund the MSSP's long-term growth strategy while simultaneously reducing debt by over 80 percent, Fusion Connect said.
Key participants in the funding and recapitalization include Morgan Stanley Private Credit, Ellington Management Group, and Investcorp Credit Management, among others. Following receipt of required regulatory approvals, Morgan Stanley Private Credit, via affiliated or managed funds, will become Fusion Connect's majority shareholder, the financial services firm disclosed.
Several members of the Fusion Connect management team also participated in the capital raise. The funding will fuel investments in:
- product development;
- sales and marketing;
- talent; and
- a client management portal for mid-sized and enterprise clients.
Fusion Connect Acquired: Executive Perspectives
In a prepared statement about the deal, Fusion Connect CEO Brian Crotty said:
"We've spent the past 18 months building a seasoned leadership team, investing in a next-generation product portfolio, enhancing our management platforms, consolidating our processes, and implementing a customer-first culture to bring world-class solutions and service to our clients.
This significant investment enables us to deliver on our industry-leading service guarantee, uniquely positioning Fusion Connect to enhance our market position through accelerated distribution. I am particularly pleased to see the breadth and depth of management's participation in the offering, further signaling the team's solidarity around the strategic vision and ability to execute. I am very excited for what the future holds for our company, employees, clients, partners, and investors."
Added Ashwin Krishnan, Co-Head, Morgan Stanley Private Credit (North America):
"We look forward to partnering with Fusion Connect in this next phase of the company's journey that builds on material improvements in the business's operational metrics and product portfolio driven by the talented management team."
Concluded Keith Soldan, CFO at Fusion Connect:
"The recapitalization is an exciting moment in Fusion Connect's ability to accelerate investment and grow market share. The investment and partnership with our new, world-class ownership group is a milestone in Fusion Connect's evolution. Our employees, management team, customers, suppliers, and marketplace are very excited about this sponsorship."