$3 Billion Cloud MSP, IT Service Provider Ahead Inc. for Sale?

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Private equity firm Centerbridge Partners may be looking to sell Ahead Inc. — an enterprise and cloud MSP, a Reuters report asserts. Ahead Inc. joins a growing list of massive MSPs that apparently are up for sale. The others include:

  1. Cincinnati Bell seeking to sell CBTS;
  2. BC Partners exploring a potential Presidio sale; and
  3. Rackspace evaluating strategic alternatives and options.

Ahead’s anticipated financial metrics for 2022, according to the report, include:

  • Revenue of $2.5 billion, up from $2.2 billion in 2021;
  • Earnings before interest, taxes, depreciation and amortization of more than $230 million.

The asking price apparently is roughly $3 billion — or roughly 13X annual 2022 EBITDA estimates.

Neither Ahead nor Centerbridge were quoted in the report.

Ahead’s Private Equity Ownership, Earlier Acquisitions

Centerbridge Partners has owned Ahead since 2020. The cloud MSP has grown organically and through acquisitions. Ahead purchases have included:

Multiple Big MSPs, CSPs Up for Sale?

Ahead joins multiple major MSPs and cloud service providers that apparently are up for sale and/or considering exits. Other potential deals include:

Why MSP Valuations Remain Reasonably Strong

MSP and MSSP valuations have held up well — despite plummeting SaaS company valuations on Wall Street. Why’s that?

  • Generally speaking, MSPs and MSSPs have always been valued based on their EBITDA (earnings before interest, taxes, depreciation and amortization). Sure, there are additional valuation metrics. But M&A in the MSP market has largely been a profit-based conversation for more than a decade.
  • Meanwhile, SaaS companies until recently were largely valued based on their annual recurring revenue (ARR) — and many SaaS investors ignored bottom-line profits.

Still, the overall managed IT services sector certainly is not recession proof. The evidence: Even in a healthy economy, roughly 25 percent of MSPs are break-even or losing money each quarter, according to Service Leadership Inc., a ConnectWise business. Certainly, those money-losing service providers could face cash-flow pressures if their customers cut per-user head counts or scale back recurring services.

On the flip side, some pundits argue that MSPs can benefit during a recession. The thesis: As mid-size and enterprise businesses scale back their own IT hiring, they’re more inclined to outsource IT services to MSPs and MSSPs. The thesis makes sense and may give some high-performance MSPs a lift. But we don’t think a recession would cause an overall tidal wave of IT outsourcing opportunities.

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