It's a question I get asked all the time: How much is a managed service provider (MSP) business worth, and what metrics should MSPs use to set their company valuations?
I still don't have an exact answer for readers, but here are some clues based on anecdotal info I've gathered plus Hewlett-Packard's buyout of Electronic Data Systems (EDS).
Of course, most MSPs are tiny compared to EDS. But EDS is, essentially, a massive MSP that generates recurring revenue and also has feet on the street for customers.
HP plans to buy EDS for about $13.9 billion. Now, let's compare that price tag to EDS's 2007 financial results. For fiscal 2007:
- EDS's net income was $828 million.
- Also, EDS's full-year revenue was $22.1 billion.
Although MSPs have been buying up one another lately, it's difficult to track valuations since so many of the deals involve privately held companies, as noted by our MSPmentor M&A Tracker.