How To Prepare Your
MSP For A Successful Acquisition Or Merger
If you own an MSP , it ’ s important to plan an exit strategy . When the time comes , do you want to sell your business and walk away ? If you sell your business , do you want to still play an active role in it ? Or do you want to merge with another company ?
Whichever path you take , you must make your business attractive to a potential buyer . That said , the time to prepare your business for an acquisition or merger isn ’ t just before you sell — it ’ s years in advance . By laying the groundwork now , you can maximize your equity when the time comes to exit .
Robin Robins sat down with representatives from New Charter Technologies and Anatomy IT to discuss what they look for when considering a potential MSP acquisition or merger . ( Note : New Charter Technologies ’ private equity partner is Oval Partners ; Anatomy IT is the managed services platform investment of Atlantic Street Capital .)
New Charter only invests in businesses where the entrepreneur reinvests and then stays on as an active partner in the business . “ It ’ s a true partnership ,” said Dan Ruhl , a partner at Oval Partners . “ It ’ s like a merger , where entrepreneurs are partnering with individuals who have experience building a much larger company . Together , we build a business that has more value . This allows the business owner to continue to run their business while separating their investment from their operating activities and their career for the first time .”
New Charter has partnered with 17 MSP businesses ( which still operate under their original business names ), and they have two letters of intent out . The average revenue of their 17 MSPs is $ 8 million a year .
Anatomy IT focuses mainly , but not exclusively , on MSPs with health care clients . Unlike New Charter , they rebrand the businesses they acquire under the Anatomy IT brand name .
Since Atlantic Street ’ s initial investment in December 2020 , Anatomy IT has acquired four MSPs and currently has two letters of intent signed . “ Our goal is to grow to over $ 100 million in revenue over the next 3 – 5 years ,” said Matt Bergin , vice president of Atlantic Street Capital . “ We ’ re growth-oriented and looking for businesses run by strong operators and entrepreneurs who are looking to partner with our platform to build the largest healthcare focused MSP in North America .”
Here ’ s What Private Equity Firms Are Looking For
Owners Who Like What They Do And Want The Best For Their Employees — Both New Charter and Anatomy IT are looking for MSP owners who still have the fire for the industry . “ The owner also wants to offer opportunities to their employees ,” Dan said . “ Many of the employees are system engineers and technical people who want to collaborate with other really smart people from across the platform .”
Owners Willing To Re-Invest — New Charter looks for people who will roll up to 30 % of the transaction proceeds . “ The reinvestment provides a great deal of financial opportunity , and this ‘ second bite ’ is a big reason companies have joined New Charter .”
Solid Numbers — The New Charter group average is 18 %– 20 % EBITDA , and that MRR growth has been 20 % each of the past two years . The ideal candidate has 10 %– 15 % growth , has 50 % or more in recurring revenue , and has double-digit EBITDA %.
Anatomy IT looks for at least $ 2 million in revenue and / or $ 500K of EBITDA and 60 %– 70 % -plus recurring revenue . Their
12 | MSPSuccessMagazine . com • VOLUME 3 ISSUE 5