Iserv Creates Acquisition

December 13, 2004
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GRAND RAPIDS — Little more than a month after creating an entity for the express purpose of acquiring underperforming technology companies and their assets, The Iserv Co. has sealed its first acquisition through the Iserv Technology Group (ITG).

Earlier this month, ITG announced that it had acquired the customers of HTDConnect from Ann Arbor-based Online Technologies Corp. Iserv will add the primarily mid- and southeast Michigan dial-up customer base of

HTDConnect to its own network.

Already one of the largest ISPs in Michigan, Iserv has expanded its network to over 50,000 subscribers with seven acquisitions in the past two years, including this fourth transaction of 2004.

In September, Ionia-based Ionia Internet Inc. was brought into the fold, while Harrisville's Renegade Productions Inc. and Scottsville's 1010internet LLC were acquired earlier in the year.

"We don't have any preconceived notions," said Iserv and ITG CEO Vic Shephard. "We're looking for opportunities and we don't come in with any prepackaged formula other than we're not looking for start-ups. We want to come into the company, nurture employees, nurture products and take it to the next level."

With Iserv since 2001 and previously CEO of Systems Software Associates — a Chicago-based division of international acquisition and management company Gores Technology Group — Shephard has spearheaded more than 20 acquisitions and organizational turnarounds in his career. Now he is helping to increase the pace and diversity of acquisitions at Iserv.

Earlier this fall, Iserv formed ITG as a separate and complementary entity focused on finding and acquiring established technology and telecommunications companies with mature business models needing additional resources to realize their full potential.

"People have always known Iserv as an ISP," Shephard said. "We want to create our own image and brand as a merger and acquisitions group or turnaround entity."

Shephard said that ITG will look to acquire underperforming companies needing additional resources and expertise to facilitate growth — companies unable to reach the next level because of weaknesses within an ownership group, lack of capital, operational issues or not enough product expertise.

"That's where we come in," Shephard said. "We bring to the table a thought process of revitalizing business. We're buying distressed assets, underutilized assets. We've done that in the ISP space and I myself have done that in the technology space, as well."

While the recent acquisitions have been ISPs, a major component of ITG's mission is diversification.

"We're looking at software companies and other technology companies like CLECs (Competitive Local Exchange Carriers)," Shephard said, "technologies that could be complementary to Iserv."

While Iserv's infrastructure and data center could provide many different opportunities for synergy with complementary technologies, one likely scenario Shephard cited includes software entities with an application service provider-delivered model. Iserv could host the ASP environment on its data center, eliminating one of the largest costs of such a model, freeing up money for investment in the business.

According to Shephard, ITG is currently in discussions with several companies, and several more acquisitions could occur within the next year.

"We want to make it clear that we're not private equity or venture capitalists," he added. "We are owners and operators and not passive investors. We're mergers, acquisitions and operations. We don't just bring the money and capital to the table; we bring operational expertise."

ITG will focus its efforts first in Michigan and the Midwest, with short-term efforts aimed principally within the state, Shephard said.    

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