Thrive has acquired Tier1Net, a managed IT services provider (MSP) focused on the financial vertical. Thrive, backed by M/C partners, has now made five MSP acquisitions while under private equity ownership.
The deal reinforces private equity's growing influence across the IT service provider and MSP software markets -- with more PE companies set to make platform acquisitions and tuck-in deals this month, ChannelE2E has confirmed.
Meanwhile, the other Thrive acquisitions involved:
In a prepared statement about the latest acquisition, Thrive CEO Rob Stephenson said:
"We're extremely excited to be partnering with Tier1Net to expand Thrive's Financial Services practice in New England. Their long-term, loyal customers will be well-served by the combination of Thrive's enhanced suite of Cybersecurity, Public, Private & Hybrid Cloud Next Generation Managed Services, along with Tier1Net's Financial Services knowledge and commitment.
Added Tier1Net CEO Marc Capobianco:
"The combination of Thrive and Tier1Net is truly a technology gamechanger for New England Financial Institutions. The expanded product and services capabilities that our clients will gain as a result of this transaction will benefit them all. It's a pleasure to be joining this first-class organization that has become one of the leading MSPs in the Northeast."
Financial terms of the buyout were not disclosed.
MSP Valuation Clues: Most MSPs — which tend to have heavy recurring revenue — are selling for about 4X to 8X annual EBITDA, ChannelE2E believes. The multiples tend to be 4X to 6X for all cash up-front deals. The higher valuation deals tend to involve pure recurring revenue, healthy EBITDA profit margins (15 percent plus) and performance-based earn outs over a year or two, according to ChannelE2E conversations with M&A participants. In rare cases, top-notch MSPs can fetch 10X annual EBITDA valuations.
MSP Mergers, Acquisitions and Private Equity
Vertical market MSPs can also fetch higher valuations -- and they've been attracting plenty of buyout activity along with private equity investments. Example deals include:
- Abacus Group, backed by WestView Capital Partners, acquired Proactive Technologies in February 2019. Proactive is an MSP focused on hedge fund firms.
- H.I.G. Capital invested in Eze Castle in June 2018. At the time, Eze Castle claimed to have more than 650 alternative investment and financial sector customers around the world.
Meanwhile, more private equity dollars could be set to flow into the MSP market. For instance:
- Periscope Equity, a private equity firm in Chicago, has confirmed plans to start acquiring MSPs.
- Great Hill Partners, a private equity firm, has just raised $2.5 billion for its latest fund. Great Hill Partners already owns Mission (a Top 100 Public Cloud MSP) and Evolve IP, a CSP that has done multiple MSP and CSP tuck-in deals.