Mergers and Acquisitions: Two East Coast MSPs In Discussions
Two well-known managed services providers are finalizing M&A (merger and acquisition) discussions, and the two MSPs will likely announce a business combination in January 2012, MSPmentor believes. The pending deal, which apparently involves two MSPs on the U.S. east coast, will potentially be the first managed services M&A deal announced in 2012.
According to sources close to each company, a handshake deal is in place and a closing date could occur in late December 2011, with an official announcement in early 2012. Under terms of the proposed deal, employees from company B will join company A, and the combined entity will be managed by company A (sorry for the generic descriptions; trying to protect my sources.). Both companies at the negotiating table focus their managed services efforts on the SMB market. Sources close to the negotiations did not disclose valuations or potential earn-out scenarios.
M&A activity in the managed services market was strong in 2011, but the bulk of the activity happened in Q1, MSPmentor believes. Many MSP CEOs are small business entrepreneurs who consider their long-term exit strategies each Q4, triggering a flurry of M&A activity early the following year, MSPmentor theorizes.
MSPmentor believes M&A activity will be strong in Q1 2012 — but not all MSPs are in a selling mood. ETG, for one, recently declined multiple takeover offers and decided instead to continue expanding its managed services business, which focuses on the health care vertical.
MSPmentor will update this story if/when the two east coast MSPs have completed the apparent M&A process.