Mergers and Acquisitions, Content, CSPs, MSP

10 MSP Valuation Estimates, Guides, Tips and Reality Checks

How much is your MSP or IT services business worth? There's the long answer. And then there's the short, honest, direct answer: It's only worth what someone will pay for it (that one comes from my dad, by the way, a real estate veteran).

Still, ChannelE2E gets valuation questions all the time. So I'm more than happy to point people to information that helps frame the valuation discussion. Here are 10 such links and tips...

1. MSP and VAR Valuation Data: Our ChannelE2E FAQ includes some entries about MSP and VAR Valuation Data. Much of the info comes from Paul Dippell at Service Leadership Inc. Critics will say the figures are a bit higher than some recent buyers have paid to sellers. But I value the data points.

2. Every MSP Acquired In 2016 (And More): ChannelE2E's Milestones Section looks at every MSP, CSP and VAR acquisition so far this year -- along with additional tech deals that are finalized, pending or rumored. Bookmark the page. It's a great way to track M&A deals in real-time, or to look back on all the deals from the past year.

3. More MSP Valuation Insights: Additional anecdotes about Dippell, including the valuation on hardware resale these days.

4. What's a $5 Million MSP Worth?: Before you answer check out the Scorecard Graphic in this article. It shows two hypothetical MSPs -- each generating $5 million annually -- but the way EBITDA profit margins can drastically impact valuation. 

5.  Overall Valuations of Small Businesses: This is a broader look at the overall SMB M&A market -- and what small businesses are worth. Read the article then compare it to items 1 and 3 above. Conclusion? Anecdotal evidence suggests your typical MSP valuation is higher than your typical U.S. SMB.

6. Why the M&A Cycle Will Accelerate: Let's ignore growing demand for cloud services, managed data protection and other growth trends. Let's just look at demographics -- the average age of SMB business owners. That data explains why the M&A trend will accelerate, overall, for the next several few years. 

7. Preparing Your Business for Sale, Part I: Check out Webcast 05: Preparing Your MSP Business for Sale. It's available on-demand through late 2017. The guest speakers are:

  • Guy Fardone, President & Founding Partner, Evolve IP: Evolve IP has acquired seven MSPs and IT services providers in recent years. Evolve IP raised $100 million in private equity funding earlier this year for potential acquisitions. Actually, deal number eight surfaced the very day of this webcast.
  • George Sierchio, VP and Senior Partner, Cogent Growth Partners: Cogent is a buy-side M&A advisor that has offered strategic guidance on 60+ MSP acquisitions.

8. Preparing Your Business for Sale, Part II: Check out the CompTIA Exit Strategies Toolkit -- one of the most comprehensive resources to help you march toward a company sale, merger, change of control or another type of exit.

9. Sources to Know: They include in alphabetical order...

  • Cogent Growth Partners, the buy-side M&A advisor focused purely on the IT services sector (MSPs, CSPs, etc.).
  • HTG Peer Groups: Scores of MSPs participate in this peer group organization. Many are M&A veterans.
  • Martin Wolf: A mid-market M&A consulting firm.
  • SellMyMSP: Connects sellers with buyers. Mostly focused on smaller sellers.
  • Service Leadership Inc., which works closely with IT service providers on business building, maturity models, best-in-class strategies and more. CEO Paul Dippell has also been involved in multiple M&A deals.
  • TruMethods: The MSP-driven organization helps members to crack the code on effective pricing, sales and business management strategies. CEO Gary Pica is an M&A veteran, and he's back in the game as a co-owner in Apex IT Group.
  • Whom did I miss? Send me an email and I'll keep them in mind for future potential coverage.

10. BONUS: We are launching a financing and funding database on Tuesday, Nov. 1. It lists resources where MSPs can find entrepreneurial guidance, financing and funding to help build the value of their businesses. There are resources in all 50 states. More than 400 companies and organizations -- across all 50 states -- are already listed. We'll say more next week. In the meantime check it out.

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.