Converge and Mainline to merge following H.I.G. Capital’s US$910 million acquisition

M&A is creating more enterprise level partners in 2025

H.I.G. Capital’s acquisition of Converge Technology Solutions, a channel partner headquartered in Canada, will take the company private in an all-cash deal worth US$910 million. H.I.G. Capital will combine Converge and Mainline Information Systems into a US-based entity with expected revenues of around US$3 billion in 2025. This will contribute to the US$595 billion of total managed services revenue that Canalys forecasts will be generated by IT channel partners in 2025. Converge projects nearly US$2 billion in revenue for its fiscal year 2024, while Mainline, acquired by H.I.G. in December 2023, reported over US$1 billion in revenue.

Converge’s CEO Greg Berard will lead the combined business as the CEO, while Mainline President and CEO Jeff Dobbelaere will serve as President. The deal is expected to be completed following a special meeting in April. Converge Technology Solutions has 1,691 employees, more than double that of Mainline, which has 634 employees after a year of PE ownership. Founded in 2017, Converge went public in 2018 and has since acquired 35 channel partners across Canada and other countries.

Converge is projecting a net loss of approximately US$145 million before taxes for its fiscal year 2024. This is mostly due to an impairment loss of approximately US$129 million in its German segment but also includes a loss of around US$19 million due to moving majority-owned subsidiary Portage CyberTech off its books.

Converge reported the following breakdown of gross sales along business lines (Q3 YTD2024):

• Product - 69.2% (68.5% for the same period last year)
• Managed services and professional services - 11.7% (13% for the same period last year)
• Maintenance, support and cloud solutions - 19.1% (18.5% for the same period last year)

Converge’s major technology partners include NVIDIA, Arctic Wolf, Alteryx, NetApp, IBM, HPE, Cisco, VMware, Pure Storage, Red Hat and Ingram Micro. The company also partners with major cloud hyperscalers AWS, Google and Microsoft.

H.I.G. Capital acquired Mainline Information Systems in December 2023. Mainline has been known as a top IBM mainframe partner, but in recent years expanded to other technologies and vendors. In 2019, it acquired RTP Technology, extending its reach to the financial vertical and in January 2023, it acquired Axcelinno for its hybrid cloud, IT automation, and DevSecOps capabilities. Mainline offers enterprise server, hybrid cloud, cybersecurity, storage and networking solutions, along with professional and managed services.

M&A activity in the MSP channel will see strong growth in 2025

Canalys forecasts a 45% increase in M&A activity within the MSP channel in 2025. Converge and Mainline are both examples of diversified partners that incorporate multiple business models such as reseller, MSP, CSP and consultancy under the banner of a single business.

The combined company is targeting key opportunities in the managed services market including cloud, backup and disaster recovery, and cybersecurity. With US tariffs already in place and more on the horizon, such deals are likely to become more common as companies look to acquire or merge with US-based partners.

After a slowdown in 2023 and 2024 following a strong 2022, Canalys expects M&A activity in the MSP channel to rebound in 2025. High interest rates and lower-than-expected valuations impacted the M&A market over the past two years. However, business owners are more optimistic about the coming year and data indicates that buyers are ready, with many MSPs believing that 2025 is the right time to sell.

Looking for more? Check out the Canalys MSP Trends and Predictions for 2025 for a more complete look at what’s in store for the MSP M&A market in 2025.