Apollo-Backed Trace3 Enters New Growth Phase with Technology-Centric Buyout

Trace3, a well-known technology solutions provider, is entering a new growth phase powered by private equity. Apollo Funds have completed a majority acquisition of Trace3 from American Securities, which will continue to hold a meaningful minority stake. The transaction comes with a leadership transition and a sharpened focus on scaling AI, cloud, and next-generation security capabilities.

Deal Summary

• Buyer: Funds managed by affiliates of Apollo Global Management.
• Seller / Existing Investor: American Securities, which will retain a significant minority equity position.
• Target: Trace3, founded in 2002 and headquartered in Irvine, California; provides enterprise IT consulting and technical services.
• Core Capabilities: The company specializes in digital transformation, data center infrastructure, cloud, AI, cybersecurity, data & analytics, and managed services.
• Strategic Rationale: The investment enables Trace3 to accelerate innovation - especially in AI, cloud, data, and security - and to drive future M&A to further its technology-led growth.
• Leadership Change: Joe Quaglia, a long-time Trace3 executive, becomes CEO; outgoing CEO Rich Fennessy moves to Executive Chairman.
• Advisors: The transaction was supported by Citi (financial advisor) and Kirkland & Ellis (legal counsel), among others.

Industry Context

The IT services sector is increasingly consolidating around platforms that can deliver more than traditional outsourcing - clients now demand advisory-level engagement across cloud, AI, data analytics, and security. Expertise in emerging technology is becoming table stakes, and firms that can combine strategy, execution, and deep technical talent are best positioned to win.

Trace3 has built its brand by focusing on advanced, next-generation IT solutions. Apollo’s acquisition signals confidence in this trajectory and underscores a broader trend in which private equity backs services firms that can pivot to innovation-led offerings. With demand for AI, cloud architecture, and cybersecurity surging, the timing aligns strategically.

Lower-Middle-Market Roll-Up Perspective

From a roll-up and platform-build standpoint, this deal illustrates several playbook principles:

1. Capability Over Scale: Rather than buying for scale, Apollo is investing in Trace3’s differentiated technical strengths - especially in AI, data, and security.
2. Leadership Continuity + Alignment: The appointment of Joe Quaglia as CEO preserves institutional knowledge and aligns with Apollo’s growth plan.
3. Strategic Use of Capital: Apollo provides both capital and a growth framework - enabling Trace3 to invest in both R&D and tuck-in M&A.
4. Balanced Ownership Structure: By allowing American Securities to retain a minority stake, Apollo ensures continuity and alignment with the existing equity base.
5. Scalable Innovation Platform: Trace3’s services-first model (consulting + delivery) will benefit from Apollo’s backing to scale both breadth (new services) and depth (technology specialization).

Why This Sector Is Attractive for Roll-Ups

• Compelling Demand Curve: Clients across industries are investing in AI, data, cloud, and security, creating persistent demand for sophisticated IT partners.
• Recurring & High-Value Services: Managed services, data analytics, and security consulting offer recurring, high-margin revenue.
• M&A Optionality: Firms like Trace3 can accelerate growth via bolt-ons in niche tech domains (e.g., cybersecurity, AI).
• PE-Uplift Potential: Private equity supports these platforms because of scalable business models that blend consulting with managed execution.
• Talent + Innovation Leverage: Platforms can attract top-tier engineers and technologists by coupling entrepreneurship (Trace3 culture) with scalable capital.

Conclusion

Apollo’s acquisition of Trace3 marks a pivotal moment for the company. With fresh capital, a leadership refresh, and a sharpened focus on AI, cloud, and security, Trace3 is well-poised to scale its innovation-led model. For Apollo, this aligns with a value-creation strategy centered on services, technology, and repeatable execution.

For founders and operators, the deal demonstrates how partnering with a financially capable investor can preserve technical excellence while unlocking growth. For investors, it reinforces the thesis that next-generation IT consultancies - especially those with a strong R&D orientation - remain attractive targets in the evolving tech-services landscape.