Moving Combat from M to L: Private Equity at Work

Photo: Combat Network Operations Centre, Ottawa, ON. Courtesy: Combat Networks.

After growing his network solutions company, Combat Networks, to about CAD $25M in annual sales, founder Rob Finucan decided a few years back that it was time to bring on an outside investor and growth partner.

Finucan, a former Nortel Networks salesperson, had spent 15 years amassing a wide range of customers, including public and private organizations looking for security, performance and reliability in their voice, data and video communication infrastructure.

He founded the Ottawa-based company in 2001 and grew it partly on the back of Nortel’s downfall as more companies — including most of Canada’s 911 emergency system — sought Combat’s services to maintain their million-dollar networks.

By 2015, Finucan decided it was time to recapitalize the company he bootstrapped and grew organically from the ground up. He now needed a partner to help him, and the company, take on more risk.

“As you build a company and see it has value, you change your decision-making from being this aggressive entrepreneur taking on the world …more towards wealth preservation,” Finucan said. ​“That’s not good for the business, but from a psychology perspective, that’s what happens.”

After seeking out private equity investors to invest in and help expand the company, Finucan agreed to partner with Ardenton Capital Corporation, which has offices in Vancouver, Toronto, the United States, and the United Kingdom. The agreement saw Finucan maintain a 30-percent stake in his company, alongside Ardenton’s 70-percent investment.

Finucan said he liked Ardenton’s partnering proposal, which included enabling Combat to operate with a fair degree of autonomy as a standalone company.

“That was a lot more attractive to me in terms of keeping the identity of the company,” he said. ​“I got to do the part I was good at, while taking some money off the table and adding private equity expertise for the next stage of growth.”

Karim Kanji, Ardenton’s director of strategic development, says his firm was attracted to Combat’s large, diversified and ​“sticky” customer base, including government and health care organizations and Fortune 500 companies across Canada.

“The company has built some great reference points, and we knew we could bank on those to support our value creation plan,” Kanji said.

Combat had a team of highly technical, well-educated employees that provided strong customer service.

“The company had also built great customer relationships,” Mr. Kanji said. ​“There was a good alignment: Rob wanted to grow, and we wanted to invest in growth.”

Three years after Ardenton bought in, Combat’s sales doubled, driven by new products and services and expansion into new geographies. The number of employees also doubled to 100 from 50.

About a third of Combat’s customers today are government and related organizations, about 20 percent are in health care, another 20 percent are in education and the remainder are large industrial retailers such as auto parts manufacturers and large restaurant chains.

Combat’s services have been critical during the COVID-19 pandemic, as organizations, particularly governments and healthcare facilities, need their systems to operate safely and reliably.

“We have continued to operate right throughout COVID,” Finucan said, including sending employees to ​“hotspots” like medical facilities to set up critical communication systems.

Combat’s goal is to double in size again in the next roughly three years, including developing the next generation 911 system and expanding even deeper across Canada and into the United States. Combat may also start making some small acquisitions, for the first time, to broaden its reach.

The company also plans to provide different technologies it doesn’t yet offer, such as IT security, data centres, and cloud services.

“Because we have these relationships with large organizations, we have the capability to sell them more than what we sell them today,” said Finucan, who recently became executive chairman of Combat after nearly two decades as CEO. The company appointed Christopher Emery, from Rogers Communications, as CEO in April.

Finucan said his goal now is to grow Combat from ​“a pretty hefty ​‘M’ or medium-sized organization, to an ​‘L’ or large enterprise. We have multiple avenues on how to get there and private equity is playing a role in that.”

In the meantime, Kanji says” Ardenton’s Operations team is committed to supporting Combat’s management team to fully realize the company’s potential on achieving their growth aspirations.”

“We believe that we’re at a good take-off point to achieve Rob’s vision of being a large enterprise business … and we’re going to continue to invest in the business,” Kanji said. ​“We’re long-term thinkers with short-term objectives.”