When NexusTek confirmed three MSP acquisitions this morning, the buyouts reinforced private equity's key role in a race to build national MSPs in the United States. Moreover, similar private equity initiatives involving MSP buyouts continue to accelerate in Europe.Abry Partners Principal James ScolaNexusTek parent Abry Partners is a familiar private equity name in the MSP sector. Indeed, the PE firm acquired Breakthrough Technology Group (BTG) in December 2017, owns a stake in Rackspace, and also helped NexusTek to recapitalize its business in December 2017.Describing Today's NexusTek deals, Abry Partners Principal James Scola asserted:
“NexusTek, in executing its strategy for growth through acquisition and organic means with such alacrity, is now entrenched as the partner that small and middle-market businesses need to migrate and manage mission-critical applications in the cloud without disrupting performance.”
The increasing amount of capital that private equity firms have to invest.
The mission critical, recurring revenue nature of MSP services. In other words, the market isn’t a passing fad.
The significant MSP industry tailwinds. Businesses of all sizes are spending more on IT during multiple inflection points (cloud, greater outsourcing of non-core functions, digital transformation, etc.). That bodes well for MSP investments, he says.
Evolving MSP business model enables greater scalability and margins. In other words, there’s real scale and less dependence on hardware sales and labor.
The highly fragmented MSP market provides numerous acquisition opportunities and potential benefits from M&A.
Madison Dearborn Partners (MDP) in April 2018 acquired Remote DBA Experts (RDX), an MSP that provides remote database administration (DBA) and cloud managed services. It sounds like additional tuck-in acquisitions are planned.
Still, the private equity gravy train won't last forever. Several PE firms are looking to exit the MSP sector amid challenges in scaling those businesses. ChannelE2E will strive to share more details about that trend soon.
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.