In the latest episode of Sunny’s Silver Linings podcast, hosted by IT By Design CEO Sunny Kaila, the focus is on the dynamic world of mergers and acquisitions (M&A) within the managed service provider (MSP) industry. Sunny sat down with Christopher Vollmond-Carstens, Chief M&A Officer at Ntiva Inc., to delve into current trends, strategies for success and future predictions in the MSP space.
Let’s look at how their conversation transpired.
The Current MSP M&A Landscape
What M&A trends are you currently seeing in the channel?
Christopher: “M&A activity is definitely on the rise. While it’s not at the frenetic levels of 2021 or 2022, it’s significantly higher than in 2023. Activity spans across all sizes of MSPs, from small organizations to large scale MSPs looking for substantial strategic acquisitions. Despite high interest rates, there is still strong interest in quality assets.”
Christopher also highlighted that the MSP market continues to thrive due to its diversified client base, high recurring revenue and resilience to macroeconomic fluctuations. This stability and potential for high returns keep the interest levels high among strategic and private equity buyers.
The Importance of Quality Assets and Due Diligence
Is borrowing debt and investing in an asset a good strategy?
Christopher: “Borrowing to invest in good assets can be beneficial, but the asset quality is paramount. The higher interest rate environment has led to more exhaustive due diligence. Quality assets continue to attract high interest, while middling quality businesses struggle.”
He also explained that thorough due diligence has become the norm, ensuring that every investment is sound and aligns with the company’s long-term strategy. This increased scrutiny helps maintain the stability and attractiveness of the MSP market.
The Ntiva and Purple Guys Merger
Talk to us about your recent deal with the Purple Guys and how it’s transforming the industry.
Christopher: “We had known the leadership at the Purple Guys for years, which established a strong foundation of trust and alignment. Our merger was unique because there was no geographic overlap, allowing for pure additive growth. We’re seeing the benefits of combining our past acquisition experiences to drive successful integration.”
This merger exemplifies a strategic approach where two companies with aligned visions and no geographic conflicts can come together to create a stronger entity. It sets a precedent for future large-scale MSP mergers, offering an alternative to the traditional private equity route.
Strategic Advice for MSPs
What strategic advice would you give to MSPs looking to leverage new trends and stay competitive?
Christopher: “MSPs should be clear about their goals, prepared with their financials and KPIs, and focus on elements that drive value like recurring revenue and client retention. Being organized and having a competent leadership team is crucial, especially for those considering stepping back post-transaction.”
He emphasized the importance of clarity, preparation, and focusing on growth drivers to enhance the attractiveness and valuation of an MSP, making it easier to navigate the M&A landscape.
The Role of Global Teams
What do you see as the role of offshore or global teams in the future of MSPs?
Christopher: “While Ntiva hasn’t acquired companies with offshore staff, the trend is evident. Success with global teams depends on their integration into the organization. Companies that view their offshore staff as an extension of their team, not just a cost-saving measure, tend to see better results.”
His insights underlined the importance of a cohesive and integrated approach to managing global teams, ensuring they align with the company’s overall strategy and culture.
Conclusion
This insightful episode provided valuable insights into the evolving MSP M&A landscape. Christopher Vollmond-Carstens shared his expertise on navigating current trends, the importance of quality assets, strategic mergers and the role of global teams. Overall, it offered a comprehensive guide for MSPs aiming to thrive in a competitive market.
