MSPs: 8 Mistakes That Can Kill A Managed Services Merger or Acquisition

MSPs: 8 Mistakes That Can Kill A Managed Services Merger or Acquisition

Merger and acquisition (M&A) activity continues across the managed services landscape. But plenty of MSPs are still struggling to formulate their own exit strategies. And some M&A buyouts ultimately fall through. Why's that? Here are eight "deal killers" small business owners make when they try to sell their companies.

First, some proper credit: The list of deal killers comes from Newsday, Long Island's largest daily newspaper. The list was designed for small business owners. I've paraphrased the list and also tweaked it a bit for the MSP sector. So here we go...

1. Overpricing: Have you taken the time to truly assess you're business's value? Too often, owners focus on how much money they need to retire. Instead, have the business assessed by an independent third-party.

2. Poor Management Depth: Are you the business? If so, then your business may be worthless without you.

3. No Skin in the Game: Because of the tight lending environment, sells often have to be willing to offer some financing terms for at least a portion of the deal.

4. Losing Key Employees: Do you have a plan to help retain employees through the sale process?

5. Lack of a Transition Plan: What's the seller's role in the business, if any, after it is sold?

6. Real Estate Leasing Terms: If your business needs a footprint, are the leasing terms reasonable for the company buyer to take on?

7. Covering Up Problems: Be honest before the buyer uncovers your secret problems during due diligence.

8. Dragging Your Feet: Delays kill deals, Newsday says. Hire a business broker if you can't move swiftly on your own.

Note: Sorry I don't link to the original Newsday article, but their website has a firewall that blocks non-newspaper subscribers.

Also of note: A growing list of organizations and associations strive to help MSPs with merger and acquisition activity. Chief among them are Martin Wolf Securities and Weaver & Associates (headed by MSPAlliance President Charles Weaver).

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