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Avasta and SiteROCK Announce Merger

Mergers and acquisitions have been the trend in the ASP market and that strategy seems to be spreading to the managed service provider (MSP) sector as well. Avasta, a San Francisco-based provider of enterprise application management services, today announced that it will merge with SiteROCK, an Emeryville, Calif.-based MSP.

Under terms of the agreement, Avasta will issue stock to siteROCK investors. "SiteROCK will be a wholly owned subsidiary of Avasta, but we will no longer be marketing or selling solutions under the siteROCK name," Megan Pulliam, SiteROCK's marketing director, told ASPnews.

The companies' technology offerings complement each other as SiteRock specializes in infrastructure management and Avasta specializes in application management. "Together, we are both broad and deep," Pulliam said.

Avasta provides an application management platform to independent software vendors (ISVs) and system integrators (SIs), who can offer the value-added service to customers on a private-label basis. SiteROCK offers ISO 9001 and ITIL (Information Technology Infrastructure Library)-certified services for performance monitoring and management of complex IT environments.

By joining forces, the companies say they can provide customers an unmatched combination of proven, automated IT support technologies and services. The technology integration is expected to be completed within the third quarter 2002.

Products and services, which will be provided under the Avasta name, will be offered in what Pulliam described as "flexible modules," allowing clients to in essence mix and match from a spectrum of products and services from both companies. Exactly how those products and services will be presented to customers is still unclear, however.

"We have begun and will continue rebranding work in the coming weeks to integrate technology and marketing efforts," Pulliam told ASPnews.

Thomas Engdahl, CEO of Avasta, will serve as CEO of the combined company. Tim Bacci, CEO of siteROCK, will join the Avasta board of directors. The corporate headquarters will remain in San Francisco. The merger has been approved by both companies' boards of directors and shareholder and regulatory approval processes are expected to be complete in June 2002.

These types of mergers are a good recipe for success, according to Corey Ferengul, an MSP industry analsyt with META Group, a Stamford, Conn.-based market research firm. "Winning vendors in the management services sector will have broad and deep services, along with a strong financial position, and key channel partnerships. Growth through consolidation is most successful when companies bring together complementary capabilities, and waste no time clearly articulating a vision."

Engdahl emphasized that there is an excellent fit between Avasta and siteROCK, in terms of strategic mission, partners, knowledge base and technology. "Within weeks of the final agreement, Avasta can offer ISVs, SIs and enterprises an even wider range of solutions," said Engdahl. "In addition, we significantly increase our operating efficiency and drive greater on-going financial strength for the company."

"The two companies are similar in size and close geographically, so we're anticipating an extremely smooth integration of operations and technologies," said siteROCK's Bacci.

When the merger is complete, Pulliam said, the newly formed operation will consist of about 60 employees, coming from both organizations. Avasta and SiteROCK will each make workforce reductions to reach the final head count goal. However, neither company would comment on the exact number of employees that will be affected by the reductions.

Avasta is listed by ASPnews as a Top 30 Enabler.


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