John McNeely reflects on strategic thinking leading up to the sale of Sword & Shield

By Tom Ballard, Chief Alliance Officer, PYA

A little more than a year after first meeting the key executives at Sunstone Partners, a private equity firm, the owners of Sword & Shield Enterprise Security Inc. agreed to be acquired and combined with two other cybersecurity firms into a new entity named Avertium.

The new company also includes Terra Verde, based in Phoenix, and TruShield out of Reston, VA, which, along with Sword & Shield, provides a much larger national footprint with more than 1,000 active clients. (See our recent teknovation.biz announcement here.)

“Everything’s been a blur,” John McNeely, Sword & Shield’s former President and Chief Executive Officer (CEO), said of the months leading up to the announcement made at the end of May.

We caught-up recently with McNeely, who now serves as Senior Vice President of Avertium’s East operations, to talk about the acquisition, the latest in a series of transactions involving Knoxville area technology-focused companies.

“It was the right time to consider some options,” he said, noting that Sword & Shield had experienced “good, steady growth” during its 22 years of providing cybersecurity risk and compliance services and more recently adding managed security to its service mix. The quality of its work repeatedly earned the company a place on top national and global managed security service provider (MSSP) lists.

“That good national exposure got us noticed,” McNeely explained.

Noting that Sword & Shield had experienced “a lot of navigating and pivots” over its 22 years, he added that “we had not been polishing the penny getting ready for acquisition.” At the same time, McNeely says the competitive landscape for cybersecurity firms over the long-term made it apparent that the company either needed more capital to grow or should seriously consider being acquired.

He added that the most common inquiries were an entrepreneur looking for his next company, strategics, traditional private equity, or growth capital. In Sunstone Partners, McNeely believes he found just the right arrangement.

“We shared a respective vision for cyber,” he explained. “I saw a good alignment.”

It also helped that the investors were impressed with what they saw in the local region’s strengths when they visited. One of those was available workforce.

“We’re getting better with the workforce pool, particularly with what UT (University of Tennessee) and Pellissippi State (Community College) are doing,” McNeely said.

Sunstone Partners also allowed Sword & Shield’s President and CEO to check several boxes that were personally important to him.

“I wanted to make sure we had our people in mind,” McNeely said. “I wanted to stay in Knoxville. I was looking for someone to help us grow to the next level.”

Describing Sunstone Partners as providing “smart capital” to bring the three previously separate companies together, he also believes that Avertium will be good for the region.

“We’re set-up for excellent growth, and we’ll be doing a great part of that in Knoxville,” McNeely said.

Avertium’s CEO is based in Atlanta, and its Chief Financial Officer is located in Nashville.

“My role is to help support them and ensure a success integration of the three companies,” McNeely says.

Looking forward, he notes that “you have to mentally prepare yourself that there will be change. It’s an adjustment.”

The acquisition of Sword & Shield is just one in a series of announcements in the last year about tech-based firms in the region securing major investments or being acquired. They include Integra LifeSciences Holdings Corporation announcement just a few weeks ago that it has acquired Arkis Biosciences; Genera’s announcement in mid-July that it has secured a more than $118 million equity investment, anchored by WindSail Capital GroupCubic Corporation acquiring GRIDSMART Technologies Inc. (see our article here); KLA-Tencor Corporation purchasing Oak Ridge-based Nanomechanics Inc. (see our article here); Clovis Point Capital LLC making a significant investment in Cirrus Insight (see our article here); Domtar Corporation acquiring a majority stake in Prisma Renewable Composites LLC (see that announcement here); and K1 Investment Management’s significant investment in PerfectServe Inc.

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