Southeast IT VAR/MSP Opportunity

searcher profile

January 17, 2022

by a searcher from Syracuse University - The Martin J. Whitman School of Management in Seattle, WA, USA

I'm in discussions with a technology services provider based in the Southeast: $3M in rev, $0.5M in adj. EBITDA, with 70% recurring revenue. We should sign the IOI this week, in which we've agreed on most of the major terms, so will move quickly to an LOI; targeting a 4/30 close.

I'm interesting in speaking with investors, searchers, and operators with experience in this space as we move into diligence and financing. If interested in learning more, please reach out (email below) and we can coordinate a time to speak. redacted

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commentor profile
Reply by a searcher
in Seattle, WA, USA
Assuming this sale isn't driven by one of the "big D's" then they've had some time to make the numbers look good, which means they've also probably been holding back on every infrastructure expenditure that they possibly could avoid for the last few years. This "technical debt" is pretty common in most companies going up for sale, but in a VAR/MSP it's a bit more of a potential landmine for a variety of reasons. Speaking of landmines, another thing to watch for in this space is what they're using for RMM software. E.g. Kaseya and SolarWinds have both had high-profile breaches recently, so if this has not already been addressed with the client-base then there may be some upcoming attrition from clients who are already quietly shopping for other providers. (On the flip-side, if you have a plan for managing that it can be a negotiating point to get the sale price down w/out actually losing any clients after.) This is just scratching the surface of course, things that are pretty universal across the MSP/VAR space, there's plenty of other potential gotchas, especially on the security side as MSPs are pretty high-profile targets these days.

Executive summary - whatever technical weaknesses they have are multiplied across all their clients and there will be a cost of remediation sooner or later which should be factored in.
commentor profile
Reply by a searcher
from Pennsylvania State University in Annapolis, MD, USA
How many employees? How long do you plan on having the seller stay around? - As a buyer and operator of MSPs|MSSPs|and VAR myself the most important thing will be the deal structure to de-risk all of the points mentioned above by the contributors.
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