https://www.channelfutures.com/wp-content/themes/channelfutures_child/assets/images/logo/footer-logo.png
Banking Technology
    • Newsletter
  • Home
  • Technologies
    • Back
    • Analytics
    • Cloud
    • Data Centers
    • Desktop
    • IoT
    • Mobility
    • Networking
    • Open Source
    • RMM/PSA
    • Security
    • Virtualization
    • Voice/Connectivity
  • Strategy
    • Back
    • Best Practices
    • Business Models
    • Channel Programs
    • Channel Research
    • Digital Transformation
    • Leadership
    • Mergers and Acquisitions
    • Sales & Marketing
    • Specialty Practices
  • MSSP Insider
    • Back
    • Business of Security
    • Cloud and Edge
    • Endpoint
    • Network
    • People and Careers
    • Training and Policies
  • MSP 501
  • Intelligence
    • Back
    • Content Resources
    • From the Industry
    • Galleries
    • Our Sponsors
    • Podcasts
    • Videos
    • Webinars
    • White Papers
  • Think Tank
  • Awards
    • Back
    • Circle of Excellence
    • Digi Awards
    • MSP 501 Rankings
    • Talkin’ Cloud 100
  • Events
    • Back
    • CP Conference & Expo
    • Channel Partners Evolution
  • More
    • Back
    • About Us
    • Advertise on Channel Futures
    • Contact Us
    • Editorial Calendar
  • MSPs
  • VARs / SIs
  • Digital Service Providers
  • Cloud Service Providers
  • CHANNEL PARTNERS ONLINE
  • Home
  • Technologies
    • Back
    • Analytics
    • Cloud
    • Data Centers
    • Desktop
    • IoT
    • Mobility
    • Networking
    • Open Source
    • RMM/PSA
    • Security
    • Virtualization
    • Voice/Connectivity
  • Strategy
    • Back
    • Best Practices
    • Business Models
    • Channel Programs
    • Channel Research
    • Digital Transformation
    • Leadership
    • Mergers and Acquisitions
    • Sales & Marketing
    • Specialty Practices
  • MSSP Insider
    • Back
    • Business of Security
    • Cloud and Edge
    • Endpoint
    • Network
    • People and Careers
    • Training and Policies
  • MSP 501
  • Intelligence
    • Back
    • Content Resources
    • From the Industry
    • Galleries
    • Our Sponsors
    • Podcasts
    • Videos
    • Webinars
    • White Papers
  • Think Tank
  • Awards
    • Back
    • Circle of Excellence
    • Digi Awards
    • MSP 501 Rankings
    • Talkin’ Cloud 100
  • Events
    • Back
    • CP Conference & Expo
    • Channel Partners Evolution
  • More
    • Back
    • About Us
    • Advertise on Channel Futures
    • Contact Us
    • Editorial Calendar
    • Newsletter
  • REGISTER
  • MSPs
  • VARs / SIs
  • Digital Service Providers
  • Cloud Service Providers
  • CHANNEL PARTNERS ONLINE
 Channel Futures

Strategy


MSP Mergers and Acquisitions: Slowing Market?

  • Written by Joe Panettieri 1
  • September 3, 2009
In the software market, vendors have spent 2009 buying up one another at somewhat deflated valuations. But in the managed services market, I sense that the pace of MSP mergers and acquisitions deals has slowed a bit in 2009 compared to 2008. My key thought: Are there too many sellers and too few buyers?

msp-mergers-and-acquisitionsIn the software market, vendors have spent 2009 buying up one another at somewhat deflated valuations. But in the managed services market, I sense that the pace of MSP mergers and acquisitions deals has slowed a bit in 2009 compared to 2008. My key thought: Are there too many sellers and too few buyers?

To be clear, MSP merger and acquisition activity certainly continues. A prime example: Carpathia Hosting, which serves federal agencies and enterprises, on Sept. 2 acquired ServerVault, a Dulles, Va.-based managed hosting provider that also targets federal agencies and enterprises. The deal comes 15 months after Spire Capital acquired Carpathia Hosting, according to a press release issued Sept. 2.

But generally speaking, our MSPmentor M&A Tracker hasn’t seen too many deals in 2009. (If you’re aware of a deal we overlooked, send along the buyer and seller company names and we’ll add them to the M&A Tracker list.)

The core problem: I think the MSP industry is filled with too many companies looking to sell and too few looking to buy. I get emails all the time from MSPs who are curious about how to find a buyer. I get far fewer from those who are looking to buy.

Instead of “looking” to sell, I think MSPs need to spend more time looking to build their assets. The stronger you are and the more noise you’ll make as a successful company, the more likely you will attract a potential buyer — even if you don’t intend to sell.

Follow MSPmentor via RSS; Facebook; Identi.ca; and Twitter. And sign up for our Enewsletter; Webcasts and Resource Center.

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Strategy

Related


  • Data breach
    MSSPs, Be Warned: You Can Be Liable for a Client’s Data Breach
    Distributed liability requires intense focus on new legal protections for MSSPs.
  • Oracle February Blog Image
    This Valentine’s Day, Give the Gift of IT Education
    Training and technology companies must promote the IT education value proposition in terms of adoption and business value.
  • Avant: MRR Models Make Channel Businesses More Attractive to Buyers
    If you’re looking to cash in on the consolidation frenzy, build a business model that scales.
  • Deadline for Digi Awards Applications Approaches
    Are you, say, a Cloud Builder? Perhaps a Master of Disaster? Apply now!

10 comments

  1. Vlad Mazek September 3, 2009 @ 4:09 pm
    Reply

    Joe,

    The issue many MSP’s are facing (along with the credit crunch) is a steep decline in business. At Own Web Now Corp we have a product called ExchangeDefender that is exclusively distributed through our partner channel, and an overwhelming majority of the existing accounts are dwindling as the economy gets worse. I am not referring to the companies going out of business, but existing reoccuring mailbox counts at companies going down as companies eliminate workers, etc.

    It’s hard to put together a lucrative acquisition package against depreciating assets and revenues…

    -Vlad

  2. Joe Panettieri September 3, 2009 @ 5:25 pm
    Reply

    Vlad: Your comment is refreshingly honest. Fact: There is a steep decline in business for many MSPs for some of the reasons you point out. The fact that small business customers are eliminating positions (i.e., “seats”) has a big impact on MSPs.

    I still believe strongly in the managed services business model. But you accurately point out some of the reasons it’s not recession proof.

  3. Jason Beal September 3, 2009 @ 5:57 pm
    Reply

    Joe,
    I live the article but for some reason I’m seeing the opposite of what you are seeing with the “core problem” you noted. I’m hearing much more from partners who are interested in buying other VARs lately than I’m hearing from partners interested in selling their business. I’ve been approached a handful of times in the last few months by successful MSPs who want to grab market share through acquisition. Their MSP businesses are profitable, they have process to support significant growth and onboarding of customers, and they know that they are in a good position to buy other resellers who may be struggling.

    Specifically, two of our partners are looking to buy resllers of the $1M – $3M size in the PA/NJ/NY corridor and in the Southern California market. Spread the word if you know resellers who may be looking to sell.

  4. Vlad Mazek September 3, 2009 @ 11:43 pm
    Reply

    I didn’t mean to imply that I don’t believe in the MSP business model. I just do not believe you will see much Mamp;A in the pure-play-MSP arena because there is very little ROI for companies that basically resell Kaseya/Zenith/AV/Backup bundles. If the sole value of the company is in the accounts and contracts it holds, and those accounts are showing signs of slowdown, then they are not as attractive as something with a lot of long term stuff. I get brought in these conversations all the time and that’s typically the deal breaker.

    MSP’s trying to sell are promoting their seat count.
    MSP’s trying to buy are buying on potential revenue growth.

    In this economy, one is at the odds with the other. And it’s unfortunately a major source of frustration for some of my partners, they keep on growing companies on contract but not making any more profit. This is the time to buy if you want the MSP business, plain and simple…..

    -Vlad

  5. Joe Panettieri September 4, 2009 @ 10:05 am
    Reply

    Hey Vlad: I don’t think you implied that at all. Sorry if somehow implied that, too.

  6. Mike Cooch September 8, 2009 @ 2:12 am
    Reply

    This is an interesting discussion, Joe. We’ve been looking at potential candidates for the last year and find that they are all still holding out for valuations that don’t make sense right now (and in a lot of cases – never did!).

    Mike Cooch
    http://www.everonit.com

  7. Joe Panettieri September 8, 2009 @ 11:32 am
    Reply

    Hey Mike: As the saying goes… a company is ultimately worth what someone is willing to pay for it. And so far, it sounds like would-be sellers haven’t been able to justify their asking price to you.

  8. George Sierchio September 8, 2009 @ 6:03 pm
    Reply

    Vlad- Excellent points.

    Joe- you nailed it with the last comment on a business is worth what someone is willing to pay for it.

    I also want to point out that I am a big proponent in all I talk about with clients and potential clients regarding this last part of your blog post “Instead of “looking” to sell, I think MSPs need to spend more time looking to build their assets. The stronger you are and the more noise you’ll make as a successful company, the more likely you will attract a potential buyer — even if you don’t intend to sell.”

    “Run it like you’re gonna sell it” is my motto and it pretty much sums it all up. A business is worth a lot more money to a buyer when you don’t need, or are not actually looking, to sell it. Those that say “I’ll sell when I get an offer I can’t refuse” will almost never see that happen because most aren’t operating to build business value. And while you are running it to build business value you’re automatically maximizing your profitability. That’s a no-lose situation.

    Most of those business that sell for top dollar had the structure in place as a means of maximizing profitability, made the noise you mentioned in the blog post and were sought after for an acquisition giving them the power position in the Mamp;A situation.

    Right now it’s still a true buyer’s market, which usually comes with way too many sellers looking to get out. That’s not an attraction to a buyer but if they make the move it spells a very low valuation for those on the sell side.

    George Sierchio

  9. Joe Panettieri September 9, 2009 @ 10:41 am
    Reply

    George: At my last company, before we launched any product or service, a key executive always raised the following question: “How will that new product help us to build our corporate assets?”

    If there wasn’t a clear answer we didn’t launch the product. From day one, we’ve used that same litmus test here at Nine Lives Media Inc. (parent of MSPmentor). Build the assets, and an enriched market valuation will follow.

  10. Yan Ness September 9, 2009 @ 3:08 pm
    Reply

    Great discussion, thanks for surfacing it.

    Jason and Mike, our experience is similar to years. We’ve been reaching out throughout the Midwest and getting pretty cool response or very high valuations. Maybe it’s us.

    Does anyone know how to get into a better quality deal flow than we’re obviously seeing? We’re looking to acquire $1-5m rev MSP’s ideally with a data center in the Midwest.

    Yan Ness (Online Tech)

Leave a comment Cancel reply

-or-

Log in with your Channel Futures account

Alternatively, post a comment by completing the form below:

Your email address will not be published. Required fields are marked *

Related Content

  • 11 Habits of Highly Effective MSP Marketers
  • Double Your Revenue with Backup and DRaaS
  • Nonprofit Takes On Cybersecurity Skills Shortage
  • Barracuda Beefs Up MSP Security Offer with Avast Acquisition

From the Industry


Sponsor Content

10 Ways MSPs and MSSPs Can Deliver Managed Detection and Response Services

February 21, 2019
Sponsor Content

Email Security: A Smart Addition to Any MSP’s Layered Security Strategy

February 20, 2019
Sponsor Content

Grow Your Business by Reducing Complexity for SMB Customers

February 20, 2019
view all

Galleries


Check Point CPX360 Featuring VMware, Versa Networks

February 8, 2019
view all

Webinars


Sponsor Content

Social media and email phishing: How to protect financial information from fraudsters

February 19, 2019
Sponsor Content

Double Your Revenue with Backup and DRaaS

February 12, 2019
view all

White Papers


Sponsor Content

A Business Owner’s Guide to Cybersecurity

February 6, 2019
Sponsor Content

The Seven Types of Power Problems

February 6, 2019
Sponsor Content

The Lean MSP

January 29, 2019
view all

Videos


Sponsor Content

Video: Ivanti Unified IT: Automate Service Requests

January 14, 2019
Sponsor Content

Linksys Cloud Manager Tutorial – Dashboard Overview

January 13, 2019
Sponsor Content

Linksys Cloud Manager Tutorial – How to Set Up a Network, Access Points, and SSID

January 13, 2019
view all

Twitter


ChannelFutures

@Arcserve unveils new disaster recovery capabilities for #SMBs through virtual machines on the #cloud goo.gl/fb/W2vSn6

February 21, 2019
ChannelFutures

.@Lastlineinc signs first #distribution agreement in NA with #Synnex. goo.gl/fb/fxXAAz

February 21, 2019
ChannelFutures

@HarmonyPSA hopes to build on 2018 growth and cement its place in the crowded #MSP mgmt software space @MSP_501 goo.gl/fb/16XbRG

February 21, 2019
ChannelFutures

@googlecloud #CSP lets enterprise run cloud workloads on-premises #hybridcloud @awscloud @Azure goo.gl/fb/bjze9r

February 21, 2019
ChannelFutures

.@HP rolls out updates to its #Device as a Service (DaaS) program. goo.gl/fb/HxxCNQ

February 21, 2019
ChannelFutures

CMIT Solutions of the Outer Banks (CMIT of OBX) goo.gl/fb/YGs885

February 21, 2019
ChannelFutures

Latest #SecurityRoundup features @ThreatConnect @solarwinds @FollowContinuum and @365datacenters. goo.gl/fb/6AQoqm

February 21, 2019
ChannelFutures

10 Ways MSPs and MSSPs Can Deliver Managed Detection and Response Services goo.gl/fb/8QrFmP

February 21, 2019

MSSP Insider

Newsletters and Updates

Sign up for the Doyle Report, Channel Futures Update, MSP 501 Update and more.

Live Channel Events

Get the latest information on the next industry-leading Channel Partners event.

Channel Partners Online

Want more? Find more channel news and analysis on our sister site, Channel Partners.

Media Kit And Advertising

Want to reach our audience? Access our media kit

Channel Futures

© Channel Futures 2019. All rights reserved.

  • About Us
  • Contact Us

Related Links

  • Privacy Policy
  • Terms of Service

Follow us

Websites are now required by law to gain your consent before applying cookies. We use cookies to improve your browsing experience. Parts of the website may not work as expected without them. By closing or ignoring this message, you are consenting to our use of cookies.
X