All Covered, a $45 million managed services specialist operating in 20 cities across the U.S., is preparing to make yet another acquisition -- marking the 10th time in roughly 12 months that All Covered has made an M&A move in the managed services market, according to a company spokesman. Here's a quick look at the strategy.
According to the spokesman, All Covered targets customers with 10 to 100 employees. And so far, All Covered has about 2,000 customers across the U.S. On the acquisition front, the All Covered says:
"We’ve been on a roll recently, having smaller competitors come and join forces with All Covered. In the last 12 months we’ve integrated the clients and employees from nine such companies, ranging in size from 3 to 35 employees...We'll have another one to announce shortly."So, what type of business does All Covered typically acquire? One recent example involves MainBrain of Baltimore, Md. That deal, completed in January 2010 but announced in February 2010, allowed All Covered to expand its presence in the Baltimore, Delaware and Northern Virginia areas, according to a press release.
This joining of companies greatly increases All Covered's presence in the Baltimore, Delaware and Northern Virginia areas. MainBrain's many clients add to the list of over 2,000 All Covered clients located in 20 other major metropolitan markets nationwide.
In the days ahead, I hope to connect with All Covered Chief Operating Officer Todd Croteau to learn more about the company's M&A strategy.
In the meantime, it remains difficult to describe what type of valuations MSPs are fetching. As you may recall, I've blogged multiple times stating that MSPs seem to be selling for about 2X their annual recurring revenue, and 1X traditional revenue. Using that formula, an MSP with $2 million in recurring revenue and $3 million in standard revenue would fetch about $7 million (that is, $2 million X 2, added to $3 million X 1).
Still, plenty of readers are debating me on the valuation topic. One reader tells me my formula is far too high -- with MSPs not fetching such a high price premium. Others say MSPs should focus more on EBITDA (earnings before interest, taxes, depreciation and amortization) to help compute a proper valuation.
Either way, I'll ask All Covered's Croteau for his thoughts when we connect.
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