Is It Time for MSPs to Sell Out?

Managed service providers have flooded me with email in recent days. Dozens of MSPs wanted more information about Sparxent, a start-up company in Salt Lake City, Utah, that's acquiring MSPs and solutions providers across the globe.

But the notes got me thinking: If you're so eager to sell, chances are Sparxent and other buyers won't want to acquire you. Here's why.

When it comes to mergers and acquisitions in the IT channel, there always seem to be far too many sellers and too few buyers. Fact is, there are thousands of VARs who are struggling with shrinking margins and they're stuck in a "product" or "break-fix" mindset. Many of those folks would gladly sell out to the first buyer who came along with a decent offer. But in most cases, that would-be buyer doesn't exist.

Sparxent, for instance, doesn't want to save struggling VARs and MSPs. The company wants to buy thriving organizations with executives who want to keep skin in the game rather than fully cash out. The idea is to acquire multiple puzzle pieces across the globe, and then snap them together into a stronger whole.

I'm not saying Sparxent's strategy will work. We all remember failed digital integrator and Web integrator roll-ups, including USweb and MarchFirst. But Sparxent isn't out to buy dozens of companies -- just a few well-run MSPs and integrators with revenues between $5 million and $20 million. Translation: most VARs are far smaller and won't appear on Sparxent's takeover radar.

Before you worry about selling a business, spend more time building a strong brand, develop deep IT specializations and get your customers under recurring revenue contracts. At that point, you won't need to find a buyer. At some point, they'll seek you out.

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