Datto to remain separately run organization if acquisition by Kaseya goes through

Kaseya has historically kept acquired companies as independent entities within Kaseya, but Datto is now worth more than Kaseya, and is a direct competitor as opposed to a maker of complementary solutions. Nevertheless, the plan is for Kaseya to remain separately run, just like those past acquisitions.

Kaseya CEO Fred Voccola

Kaseya’s recent announcement that they have entered into a definitive agreement for Kaseya to acquire Datto for $6.2 billion in an all-cash deal has the potential to create enormous disruption in the managed services space. The deal is a relatively complex one, in part because the share price of $35.50 that Kaseya has offered for Datto, is 52% higher than Datto’s March 16 closing price, and makes Datto worth more than Kaseya. The primary funding for the deal will come from Insight Partners, which owns Kaseya, with addition major investment from TPG and Temasek. Other investors like Sixth Street are also participating. Until now, however, there has been relatively information about the specifics of the deal or what the new company will look like.

Fred Voccola, Kaseya’s CEO, explained why it has been over a week until Kaseya began talking about some specifics of what the deal will mean to the companies involved.

“Datto is a public company that we bought, with all the regulations that entails,” he said. “There is also a long time between signing and closing. The lawyers scared all of us with their recommendations for caution. We probably were too conservative. But we concluded that we can’t not say ANYTHING at all about it. Our competitors are competitive and they are trying to scare customers by sowing FUD [Fear, Uncertainty and Doubt]. As competitors, they are just doing their job, but humans are not wired well for change, so we needed to be as clear as we are able to be legally about what is happening.”

Voccola stressed that even though all the companies Kaseya has bought since its own acquisition by Insight have kept their management separate, and that Datto offers similar services as Kaseya, while the other acquisitions had adjacent technologies which strengthened the Kaseya platform, the plan for the integration of Datto remains the same. It will be run and managed separately.

“The law states that we can’t disclose details, but I can talk about this at a high level,” he said. “Every time that Kaseya has bought a company, we didn’t leave it alone. We reinforce and invest more. That is the plan with Datto. We don’t lay people off. We keep the brand and culture of the company. I learned this lesson when I had an APM company, Identify Software. BMC bought us and they destroyed the company by changing everything to do it the way BMC did it. At Kaseya, every company we buy, we keep them great.

“With Datto, the plan is that we will support all products moving forward – and not to force customers to switch,” Voccola said. “For companies like Kaseya it might cost us $10-20 million to maintain multiple products in the same space, but that’s still better than ticking off customers. I can also tell you that in every single acquisition that we have ever done, we have made the products more affordable after we bought them – on average 30-40% less expensive.”

Voccola noted that most of the people who come to Kaseya in an acquisition tend to stay, and that even founders of these companies tend to stay for a while
“Kevin Lancaster [ID Agent] left after three years, because he is a great entrepreneur who went and started another business, he said. Chris Day stayed two and a half years. Michael Mittel, who came with Rapidfire Tools is still here. When this deal closed, we had meeting of the Kaseya Leadership Task Force, and two-thirds of them had come from an acquisition. Austin McChord built a great company, and we don’t want to screw it up. It’s my job to make sure Kaseya offers enough opportunities to the 2600 incoming Datto employees that they will want to stay.”

The deal is currently expected to close in the second half of 2022, subject to regulatory approval. Both boards have unanimously approved it, and shareholders holding in aggregate approximately 70% of the issued and outstanding shares of common stock of Datto have approved the transaction by written consent, making no further action by other Datto shareholders required to approve the deal.