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Why IT Managed Service Provider (MSP) businesses are being acquired?

Why IT Managed Service Provider (MSP) businesses are being acquired?

The First of Four Installments in our Series:  Managed Service Providers

There is an acquisition frenzy over cloud-based technologies in the marketplace today.
If you are a business owner in this space, this should interest you.

A primary factor is heavy demand for managed services by banks and healthcare in the light of market and regulatory changes. Second, talent scarcity and changes in consumer behavior. These are both factors contributing to heightened merger and acquisition (M&A) trends within the Managed Services Provider (MSP) industry.  So much so, the MSP industry is forecasted to grow to $310 billion within the next 5 years.  Within such a scenario, the best response is to be ever-ready for the upcoming opportunity – acquire or be ready to be acquired. Let’s have a look at top drivers for M&A activity:

Are you a one stop service provider?

IT solution providers want to provide all-services to their customers, from basic IT support services to cloud solution, application integration, and cybersecurity.  MSPs specializing in monitoring and managing security – MSPs or MDRs- are the most desirable targets.

Retiring baby boomers 

Business owners who spend the last four to five decades building their companies are ready to retire and they are plenty. Over 12 million baby boomer owned businesses will be sold in the next 10 years, so it’s important to get to the front of the line.

Geographic or market dominance 

MSPs are attempting to grow in certain markets or geographies to either consolidate their position or to expand their footprint in offerings.

What does this mean for current MSP owners?

M&A activities will continue to grow for several years and it’s important that owners remain ready for the next opportunity.  If you want to prepare your business for sale or acquisition: learn more about the value of your business, different buyers–strategics, investors, employees, or others–and their value drivers.

Whether you are interested in knowing the worth of your business or interested in buying an IT Managed Service Provider firm, Sunbelt Business Advisors can be of your help.

For additional value drivers, please continue reading part 2 of this series.

Tarun Gujral
Business Broker