ITG, the acquisition arm of Michigan-based ISP Iserv, has purchased well over a dozen ISPs in the past two years.

by Jeff Goldman [June 28, 2006]

The Michigan-based ISP Iserv was founded in 1996, and has grown since then to become central Michigan's largest independent ISP. Company CEO Vic Shepherd says that while the ISP started with a focus on residential service, it now serves both business and residential customers—with a leaning towards business. Services include dialup, DSL, T-1s, DS-3s, hosting and colocation.

In October of 2004, the ISP formed the Iserv Technology Group (ITG) as an entity focused specifically on finding and acquiring ISPs and other technology companies. "We realized that the fastest, most attractive way for us to get to size was to acquire non-performing ISPs, or ISPs that couldn't quite make the scale," Shepherd says.

Iserv Technology Group (ITG) 5222 33rd Street Grand Rapids, MI Voice: (616) 493-3720 mailto: info@iservtechgroup.com

And ITG, Shepherd says, is much more than just a name—it has a full staff dedicated to doing outbound marketing, and identifying ISPs and other technology interests. Shepherd says ITG has now done 17 acquisitions—in September of 2005, the company made its first non-ISP acquisition, purchasing Pinika, which provides online document storage for the litigation and mortgage industries.

ITG's outbound marketing strategy, Shepherd says, is simply focused on making ISPs aware of what ITG is offering as an acquirer. "We send them articles, success stories about who we are and what we're doing—we make sure that they know who we are if they ever consider that maybe they want to be part of a larger entity," he says.

Looking for customers
The most significant factor in making an ISP attractive to ITG, Shepherd says, is a substantial—and reliable—customer base. "We like to see sticky customers, which means that they're customers in maybe an outlying geographic territory where there's not a ton of competition from cable providers and other companies," he says.

One thing that makes ITG stand out is that it's willing to work with small ISPs. Shepherd says he prefers ISPs with more than 1,000 subscribers, but he'll consider smaller providers as well. "They can be pure dialup, they can be dialup and DSL, they can be no dialup and purely a business-based provider with DSL and business-related services, they can be a CLEC that has facilities and subscribers on the ISP side—and we're also interested in VoIP providers that have customers or unique technology," he says.

And there really isn't a maximum size of ISP that the company will consider. "We've looked at them in the 100,000 subscriber range," Shepherd says. "Capital is not an issue—it's just the willingness of the seller to do the transaction with us."

And while Iserv has shifted its focus from residential to business customers, Shepherd says that's not a consideration for ITG's acquisitions. "We're interested in customers, whether it be residential or business," he says. "We like customers in a dense geographic territory, because we've been really successful at going in and taking customers, putting them on our network, and selling them additional products that we have."

A smooth transition
What really makes ITG different, Shepherd says, is the fact that it strives to make its acquisitions as seamless as possible. "When we take the customers into our organization, they have seen, number one, an increased level of service, and number two, an increased level of capacity—with no disruption in service," he says.

The lack of disruption, Shepherd says, is key. "There are acquirers out there that require the customers to re-enroll in their network," he says. "We don't force people to do that. Our goal, really, is to take the customers and to show them increased value in services and in products. If we can't do that, then it's not worth it—it's not a viable opportunity for us—because the customers will just choose another option."

That doesn't necessarily mean selling the customers new products—it may just mean adding to the range of services available to them. "Many of our customers by extension get new services, a better spam environment, better filtering products, better acceleration products, better webmail, a better footprint—and they get all of that as part of just coming over to us," Shepherd says.

The fact is that the vast majority of ISP owners, Shepherd says, want to be reassured that their customers will be treated well during and after an acquisition. "Most of these people are businesspeople that have put a significant portion of their life in it," he says. "Their customers are their friends, relatives, local business acquaintances and so forth, and they want to make sure they're going to be taken care of."

—End