MSP Valuation Comparison to Rolex Daytona Watch?

So the question is: Is the private market for MSPs headed in the direction of the public stock market, or does it operate under its own steam that will create even more frothy valuations like that of the stainless steel Rolex Daytona watch – which is particularly valuable due to its scarcity (each Rolex store receives only one per year)?

For answers, we spoke to several of our business partners well situated to measure the pulse of the market. Patrick Fear is managing director at Alliance Bernstein Private Credit Investors, which has provided the financing behind some of the largest MSP recapitalizations, including Thrive, Coretelligent and Ntiva. We also spoke to Reed Van Gorden, head of origination and managing director at Deerpath Capital Management, a leading lender to lower middle market MSP platforms (many of which Focus advised on).

Both of them told me they’ve seen only minor changes in the private market for MSPs so far, and that they believe MSPs have different characteristics that will help them avoid the same fate as publicly traded technology companies.

“We continue to believe that IT MSPs are defensive as they are a necessary service that will not have an adverse recessionary impact,” Van Gorden told me. “Many nonessential companies will be challenged by more rapid declines in earnings and some will go out of business, but these are mission-critical businesses.”