MSP Mergers and Acquisitions: Where Do Consultants Fit In?
As the merger and acquisition trend continues, some managed services providers (MSPs) are leveraging M&A consultants to assist — and potentially accelerate — the process. The latest example involves Cogent Growth Partners, a buy-side M&A advisory firm, assisting Jamison West Consulting Services Inc.’s buyout of Titanium Ant Inc. Another example involved Weaver and Associates Ltd. assisting Do IT Smarter’s sale in 2010. Is this the start of a larger trend?
So far, Cogent has assisted JWCS on two deals — helping the managed service provider to solidify its footprint in the Greater Puget Sound (Seattle) region. And to reiterate: Cogent only works on buy-side opportunities. After the M&A deal is official, Cogent sticks around to assist with the integration process (Cogent’s team includes former MSPs). Also, Cogent has been known to respectfully decline business when a proposed engagement didn’t have clear upside and achievable goals for the buyer.
Meanwhile, Do IT Smarter CEO Lane Smith has spoken highly of his experiences with Weaver & Associates Ltd., which helped to facilitate Do IT Smarter’s sale to ClearPointe in 2010. Weaver & Associates was launched by MSPAlliance Founder Charles Weaver. MSPAlliance has also evolved a bit towards the consulting industry, offering valuation and angel investor assistance.
On the record, I don’t officially know how much M&A consulting services costs. But according to one CEO in the know, an M&A consulting engagement can include:
- An up-front retainer for three to six months
- A 5 percent to 9 percent commission if there’s a resulting M&A engagement (less the original retainer fee), according to CEO in the know.
The fees, according to the CEO, typically include such services as developing an executive summary (to help position the business), financial document preparation, outreach to potential buyers (or sellers), term sheet management, and negotiating M&A terms.
I’m not suggesting that all MSP deals involve an M&A advisor. But it seems like this is a growing niche.