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The 3 Things MSPs Preparing for M&A Opportunities Should Do Now

June 04, 2014  By Steve Alexander
I have sold two managed-services companies, and the experiences were as different as night and day. The day after I sold the first one, I returned as a consultant so I could maximize performance and, ultimately, my ROI. After I sold the second company, I hopped on a plane and took a beach vacation.

The difference was having a business-management platform built exclusively for IT service providers (ITSPs). With the second sale, I was able to quantify performance with metrics that clearly defined value, which in turn reduced risk for the buyer. I didn’t have the platform with the first company, so I had to stick around to make sure what I said would happen actually did happen.

It’s an important lesson for all ITSPs, even if company owners think a sale or acquisition is far off. History tells us that as industries mature, M&A activity rises. In our maturing industry, large providers are buying smaller companies to rapidly add new services and/or new markets; and companies outside of our industry (i.e., telecoms and business-equipment providers) see acquisitions as an easy way in.

The reality is that opportunities and offers can come along at any time, and having immediate access to comprehensive real-time operational intelligence is a huge advantage, no matter which side of the transaction you’re on. An ITSP-specific business-management platform gives companies the ability to:

  • Maximize company value. As businesses grow and require more assets, profitability is harder to achieve. Complexity clouds the input/output ratio, so we can’t definitely determine which clients, technicians and services contribute meaningful profit and which contribute marginally or not at all. A business-management platform clears the clouds so leaders can make better choices and amass as much value as possible over time.
  • Build operational intelligence. A good business-management platform measures every transaction at a granular level, and then automatically integrates, sorts and stores this data in a central location. It provides rich user-access tools to tap this data and capabilities for internal and external benchmarking.
  • View performance information in real time. Yes, you could hire someone to exclusively measure each transaction, document results, and keep running tabs on every client and every technician. But a business-management platform can do this automatically, and it never goes on vacation or misplaces spreadsheets. A good platform also has rigorous search capabilities, so users can pull out exactly what they need at that moment.
When our industry started out, cash flow was the most important metric at most companies, and the outlook was short term: Do we have enough money to keep the doors open another year? We said yes, yes, yes to every contract because in the end (hopefully), we’d get the cash.

Now we have bigger companies, bigger portfolios and bigger opportunities. If your company doesn’t have access to an immediate and clear picture of its worth, it’s time to invest in an ITSP-built business-management platform. Not only will its capabilities be highly valuable when buying or selling a company, but also to make the best-possible choices every day.
Steve Alexander
Steve Alexander is owner of MSP-Ignite and has 25 years of experience managing, building and eventually selling two regional Managed Services Providers. He has worked with hundreds of MSPs and has been involved in over a dozen mergers and acquisitions. He is a subject matter expert for CompTIA’s Managed Services Trust Mark, an Advisor to their Managed Services Community and has served on several regional and national advisory boards. He facilitates several industry peer groups.

Steve is one of the original Autotask MVPs and has successfully implemented and trained hundreds of Autotask users as a certified consulting partner.  

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