Turning the tables a bit, fast-growing Orange County tech company Trace3 has bought a Silicon Valley counterpart.
The IT services provider and consulting firm acquired Groupware Technology in Campbell on undisclosed terms.
The deal’s expected to boost the Irvine-based company’s annual revenue to as much as $1.6 billion while expanding its market position in Northern California and Arizona.
As of mid-2019, Trace3—which provides cloud, data intelligence, security, software development and operations, and enterprise IT services to thousands of corporate customers—was on track to do about $1.2 billion in annual business, following the addition of Grand Rapids, Mich.-based Data Strategy and Optio Data the prior year.
Trace3 is privately held by H.I.G. Capital, a Miami-based global private equity and alternative assets investment firm.
“We have been looking for a strategic partner for Trace3 with roots in Silicon Valley for some time,” said Kevin Van Culin, managing director with H.I.G. Capital. “The opportunity with Groupware presents a number of synergies in terms of geographic coverage and solution sets. We are thrilled with the prospects of this new partnership.”
The existing offices of Groupware will stay in Campbell and the name there will be changed to Trace3 by the middle of next year as part of a phased integration. Trace3 said that with its focus on innovation and emerging technology, expansion in Silicon Valley is a natural move.
Trace3 Chief Executive Rich Fennessy made it clear that the company’s headquarters will stay in Orange County, which he says has a “nice tech flavor.”
“Our business in the Orange County-Irvine area has been doing well in 2020,” he told the Business Journal on Nov. 9, adding that the company is optimistic about the future beyond this year.
Fortune 500 Clients
Trace3 is one of the local area’s largest IT solutions firms, providing a variety of operations analytics, cloud computing, cybersecurity, machine learning, artificial intelligence, big data intelligence, and other offerings.
Trace3 clients include many Fortune 500 companies. Its customer base has historically been strong in finance, securities, healthcare, entertainment and manufacturing. Trace3 says its competitors include World Wide Technology (WWT), Insight and Presidio Inc.
The addition of Groupware will strengthen Trace3 offerings in cloud optimization, data center infrastructure, first-call support, hardware integration and configuration, and global shipping and logistics, the companies said when announcing the deal last week.
The majority of Groupware’s approximately 200 employees are in Silicon Valley, Trace3 Fennessy said.
Groupware’s hometown of Campbell, located south of San Jose and Santa Clara, is not as well known for high tech as other sites in Silicon Valley, but it does boast of being the original home of eBay.
Fennessy said the combined company will have about 1,000 employees, with approximately 150 in Orange County.
Next Steps
Further growth is on the way, Trace3 officials said last week.
“We’ve been on a nice growth trajectory for several years,” Fennessy said.
He said the company would be growing both organically, and through the buying of additional companies, adding that “acquisitions are part of our future.”
Trace3 had moved up one notch to No. 17 on this year’s Business Journal list of the largest private companies in Orange County before the acquisition.
Fennessy said that $1.6 billion is a “good number’’ for the projected annual revenue of the combined company, up from Trace3’s $1.2 billion per year before the acquisition.
Founded in 2002, Trace3 maintains 25 offices across the United States.
Tyler Beecher, then the CEO of Trace3, oversaw the 2018 merger with Data Strategy; at the time he said “I think it’s going be easier to get to $2 billion” than $1 billion.
Beecher is now the Trace3 chairman.
Role Reversal
The Groupware acquisition runs counter to recent trends in OC’s tech industry.
In recent years, it’s been Silicon Valley that has attracted several local tech companies. Chipmaker Broadcom moved its U.S. headquarters to San Jose following an acquisition, while internet security firm CrowdStrike moved to Sunnyvale. Fellow cybersecurity firm Cylance of Irvine was snapped up by BlackBerry two years ago; the executive team of Canada-based BlackBerry is largely based in Northern California.
