For Masergy’s MacFarland, Liquidity Falls from the Cloud

Plano, Texas — When it came to liquidity, Masergy was beginning to appear a bit “long in the tooth,” says Chris MacFarland, commenting on the timing of his arrival at the managed services and cloud communications firm where he now serves as CEO.

Back in the summer of 2008, MacFarland, a company outsider at the time, was asked by Masergy’s then chairman, Royce Holland, to take a hard look at the company, whose original investors were known to be patient yet ever watchful. Of course, a hankering for liquidity among Masergy’s investors should not have been unexpected in light of the 8 years that had passed since Masergy had received its initial swell of funding.

“They definitely were looking to gain some liquidity, but what I found was a business that from a macro standpoint was in a good place, but not a great place, and as with many companies as they move from early stage to midstage, there are adjustments that needed to be made,” says MacFarland, who, after sharing with Holland a number of recommendations, accepted an invitation to join the company as chief operating officer in August 2008.

Masergy’s venture capital investors would obtain the liquidity they desired 3 years later when the majority of Masergy was acquired by private equity firm Abry Partners, as part of a deal that MacFarland today characterizes as a “recapitalization.”

“Our private equity investors are very satisfied, and we now have a strong source of growth capital going forward,” explains MacFarland, who says that the firm captured $170 million during its most recent fiscal year ending in June, and now expects to grow north of $200 million during its 2014 fiscal year.

Along the way, MacFarland has adroitly expanded the firm’s reach into cloud-based communications — a direction the firm loudly signaled when Masergy acquired Los Angeles–based cloud communications provider Broadcore in July 2012.

Asked to look back at the growth hurdles he confronted upon his arrival, MacFarland says that the timing of his landing at Masergy — on the eve of what became a global recession — may have afforded him a wider berth.

“I would tell you that it definitely helped. The board granted me great operating ability to address these things,” explains MacFarland, who says that impatient investors took a backseat to resolving the firm’s stagnating sales and siloed managers.

“The reality is that most companies, as they compete and grow from $10 million to $50 million or $50 million to $100 million, get caught up in their own minutiae, and there will be this huge bureaucracy that occurs and prevents a company from operating at an optimal level,” he explains.

To eliminate Masergy’s bureaucratic bottlenecks, MacFarland set out to reassess the firm’s core values and formulate new ones that could put the firm on a path to long-term growth.

While some of the values that MacFarland is credited with helping to instill at Masergy may be standard within many companies (e.g., a passion for customers, accountability for actions), a new employee edict to treat customers and business partners equally was arguably innovative for its industry.

“This represented just a fundamental shift. Inside the broader telecommunications and managed services space, you end up doing business with a lot of partners, and being able to have healthy relationships around the world is critical because you are dependent on them as part of your supply chain,” says MacFarland.