Private equity, MSP, Content

MSP Investment: Evergreen Services Group Buys Stake In Tech-Keys

Evergreen Services Group has invested in Tech-Keys , a Top 100 Vertical Market MSP headquartered in Howell, New Jersey, the companies confirmed today.

Among the key points to note:

LinkedIn: Michael Fried, CEO, Tech-Keys
LinkedIn: Michael Fried, CEO, Tech-Keys
  • Tech-Keys provides IT design, implementation, support and maintenance for SMB customers in multiple verticals throughout the U.S.
  • The MSP generated $11.7 million in annual revenue for 2018, according to the company's Inc. 5000 honor for 2019.
  • Tech-Keys, which has 62 employees and a Net Promoter Score (NPS) of 90, will continue to operate independently under its leadership team, including founder and CEO Michael Fried.

Evergreen, backed by private equity firm Alpine Investors, has acquired and/or invested in 14 managed IT services providers (MSPs) since launching in late 2017. Unlike many private equity financial models, Evergreen takes a very long-term "buy-and-hold" approach to the market, striving to build sustainable value over the long haul.

Evergreen Services Group Invests In Tech-Keys: Executive Perspectives

Evergreen Services Group CEO Jeff Totten

Describing the Tech-Keys deal, Evergreen CEO Jeff Totten in a prepared statement said:

“Michael has built an incredible business in Tech-Keys by focusing on customer service and creating a great place to work. We look forward to supporting Tech-Keys continued growth and commitment to its customers and team. We have enjoyed working with Michael since our first interaction and admire both his generosity and his commitment to the community.”

Added Fried:

“Evergreen has proven itself as a growth partner with a long-term vision that allows its companies to continue operating independently. With Tech-Keys’ success and intent to scale, Evergreen provides a clear path forward that I am confident will make us a better business for our customers and our company.”

Added Bradd Wittwer, president of Evergreen:

“Tech-Keys’ commitment to the client is second to none. Their dedication yielded exceptional interviews whenever we tapped into the customer experience. They live by their core value of care, and customers gravitate toward that. It’s no surprise their growth has been impressive. They’ve thoughtfully developed around specific verticals, which enables such outstanding service delivery.”

Concluded Ramsey Sahyoun, Evergreen’s Head of M&A:

“Tech-Keys is just a great company. The SMB managed services industry in the US is made up of 10,000 companies and in a short 10-year period, Michael and the Tech-Keys team created one of the largest companies we’ve seen in the industry. It’s incredibly impressive and speaks to the growth mindset of the whole organization.”

MSP Mergers and Acquisitions: Company Valuations

Financial terms of the deal were not disclosed.

Still, ChannelE2E readers continue to poke and prod our site for MSP valuation information. In some rare instances, we’ve seen some MSP valuations reach 8X to 10X annual EBITDA. But ChannelE2E cautions MSP buyers, sellers and financiers: Those lofty valuations are extremely rare deals, typically involving larger MSPs with strong annual recurring revenue growth, healthy profit margins and perhaps some intellectual property that's truly unique. Or in some cases, a desperate buyer willing to overpay.

The more reasonable valuation ChannelE2E has heard is 6.5X annual EBITDA — with many deals ranging from 4X (yes, that low) to 8X annual EBITDA, based on a range of factors (cash up front vs. earnout, percentage of revenues from monthly recurring services, etc.), according to ChannelE2e interviews with key M&A sources at various conferences throughout 2019.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.