Here’s What MSPs Should Know Before Accepting Private Equity, Selling Their Business

We have all done some level of MSP dealmaking, so we know the details of what goes into them. But, what MSP leaders need to know about private equity, especially considering all the activity in the market lately, requires partners to drill down into the nitty-gritty.

In their session on this topic at the MSP Summit, April 11, co-located with the Channel Partners Conference & Expo, four executives will share what MSP leaders need to know about private equity (PE). They will begin with new platforms – the lifeblood of private equity – and will address what are called add-ons.

Fierce Competition

Know this: The competition for standalone MSP platforms has been fierce over the past two years. Why? Because there is a limited supply of companies in the $2.5 million-$6 million range seeking private equity groups. The good news is, it’s a seller’s market. This is forcing private-equity groups to get more creative than ever as money pours into the channel. 

This session will also look at how to judge if a company is a cultural, strategic and financial fit; also, how M&A can fill employee and leadership gaps or help inactive shareholders exit while increasing capabilities/footprint and reducing customer concentration.

We asked the session leaders – Juan Fernandez, co-founder/CEO, MSP Growth Coalition; Michelle Accardi, CEO, Logically; Cristian Anastasiu, managing partner, Excendio Advisors; and Colin Knox, CEO, Gradient MSP, to weigh in ahead of the show. See the insights from Knox and Anastasiu below.

Channel Partners: What are a few of the key things that MSP leaders need to know about private equity?

Gradient MSP’s Colin Knox

Colin Knox: It generally involves a change of control investment or full acquisition with employment retention. And it often involves a remaining equity position for executives.

Determine how to maximize your value, if being acquired by a PE firm, or an MSP that is PE-backed. This could be unique geographic coverage, specialization in a vertical or technology stack, or high profit. PE strategies are built on leveraged financing plans against the earnings of the total combined business. So profit is very important to them.

Cristian Anastasiu: Private equity groups, also called financial buyers, are in business to produce significant ROIs for their investors. As a result, the financial aspects of a business are very important to them, especially when compared to strategic buyers.

PEs are different from strategic buyers …