At this year’s CRN MSP North conference, Mo Aneese joined a panel looking at how to maximise the value of your MSP/MSSP business. Here are his key takeaways from the day:
"In a fast-commoditising space, managed service providers need to be able to differentiate themselves in what is an extremely crowded marketplace. For those that can successfully do this there is a huge opportunity for growth, and private equity investors have taken notice.
At Livingbridge we’ve invested in a number of MSPs, including most recently Adarma, M247, Onyx and Southern Communications. We’ve worked closely with the management teams to deliver impressive and sustainable growth, whether that is through supporting ambitious buy and build plans, or helping with all the other challenges that come with growing a business: having the right team around you; building a platform that can scale as you do; acquiring and retaining more customers; expanding your product suite; or growing into new global markets.
This experience has confirmed our belief that investing in MSPs is an incredibly successful strategy, both for us, the management teams we back and the regions in which they operate.
One of the reasons it is so appealing as a space is because the technology on offer is at the heart of every business operation, meaning it is mission critical for its clients. As well as giving it resilience during economic downturns, this also means there is a massive total market size in which it can operate in and win.
That market is hugely fragmented, meaning many businesses in this space including in our own portfolio, are delivering significant growth through M&A. Having the firepower of an investor behind you with significant funding and - in Livingbridge’s case - a dedicated in-house team focused on corporate development, can really accelerate that process.
The quality of earnings are also attractive to investors. MSPs generate recurring revenues, with sticky customers that often have long term contracts. It is also why it is so important for MSPs to understand the needs of their customers as the technological landscape shifts. There is a big opportunity to cross sell new services as their needs change. Being able to demonstrate the quality of your customer service and cross-selling capability will make your business extremely attractive to investors.
Given all these fantastic reasons to back MSPs, the panel was also asked if current valuations are sustainable. For me, I see many sectors in the TMT market that are hot, but I’m more than comfortable investing in MSPs where they have high quality earnings, a great customer base and a huge market to go for. There are many other sectors where the multiples are just as high, and they don’t have the contracted revenue MSPs have. Given the level of liquidity in the private equity and debt markets, I think valuations will continue to remain strong."
If you own an MSP business and would be keen to discuss the valuation of your business or how we’ve helped similar businesses in the past, please get in touch on firstname.lastname@example.org.