Tim Conkle, CEO and Founder, The 20 MSP

“The pandemic isn’t over, but the pieces are falling into place and people have a renewed hope in the direction of the economy. Businesses have been in freefall for a year or more. Some companies have been weakened by their response to the pandemic (which makes them cheaper for IP or similar), while others have weathered it and even flourished.

“Sharks are back in the water with acquisitions and companies are looking to merge to either grow or gain access to new resources. PE firms are just following the money. Tech weathered the pandemic as a whole, while other industries crumbled. This has created the economic conditions to foster mergers and acquisitions until the economy changes or is forced to change.

“The value of these mergers and acquisitions will come down to whether they have a reproducible and scalable process. PE firms want to see something as close to turnkey as possible (whether they intend to follow that process or not). Prospective mergers want to see an easy way to integrate both sides. Either way you slice it, a successful merger or acquisition of an MSP relies on standardization of the tools and processes a company employs to allow scalability.

“A company where a new owner can step in and follow a runbook to continue functioning (i.e. process oriented) is going to be more profitable on paper (and usually in reality too) than one which is a chaotic mix of ad hoc processes.

“Groups like The 20 or similar which allow a standardized stack while outsourcing many of the more difficult aspects for a managed service business can increase the potential value of an MSP. The more volatile the element to be outsourced, the better for the valuation in the eyes of a PE firm. There is a cost for adapting a business, and the lower that cost, the more likely it is to make business sense for both parties.”