Acquiring IT services / MSPs : any operators or investors willing to help?

February 16, 2023

by a searcher from University of California, Berkeley - Haas School of Business in SF, CA, USA

Hey all,

I have been looking to the MSP / IT services space. Thanks to this platform and the copious posts, I am starting to develop a rubric on how to assess an opportunity in the space.

My knowledge set is of course not complete and I was hoping to fill some of these gaps with help from operators (or former operators) and investors in the space. Specifically I have been thinking about :

1. Product and service offerings

With such an assortment of services being offered to a variety of clients and industries, in an array of formats, I was curious how an operator and or investor would think about an acquisition as it relates to a target's existing offerings and clients. With so many companies calling themselves "MSPs", how is a seasoned mind going to assess a company's offering?

2. Market trends

Apart from a trend to consolidation, I had some takes on trends likely to impact this sector in the future but again figured an operator and or investor would have a better 30,000 ft view.

Just message me or email me at redacted Thanks!

Reply by a searcher
in New York, NY, USA

One feature to look out for as a indication of you about to waste your time: companies sometimes claim to be MSPs but really the revenue/earnings are just VARs and the recurring earnings are significantly lower than the CIM makes out (or perhaps doesn't even address). Be vigilant in seeking actually recurring revenues. For my part, I also suggest thinking of the client base both as a source of value in and of itself (particularly for MSPs that don't have as big a barrier to entry/competitive moat) but also as a platform for growth in and of itself. To my eye, customer acquisition is hard but cross-selling is easy.

Reply by a searcher
from London Business School in Miguel Hidalgo, Mexico City, CDMX, Mexico

As long as some of the services offered by the company are proprietary and don´t have a complete offering of services owned by third-party companies, then, it is a company worth looking at from a search fund perspective. The value-add becomes somewhat smaller if you're talking about MSPs that only offer solutions created by others. The strongest feature in this instance becomes the client wallet that the company has and its ability to retain customers.

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