Written by: Charles Weaver – Co-Founder, MSPAlliance

There are a lot of private and institutional investors interested in the managed services profession right now. MSPs are reporting a lot of inbound activity from investors, especially around security. Proper alignment between MSP owners and investors is crucial for creating synergies and ultimately getting a deal beneficial to both parties.

Most investors do not have a very good handle on the managed services profession and are merely looking for opportunistic deals. Opportunistic investors are perfectly fine, as long as you know what to expect. The following guidelines are useful both for investors and MSPs alike. Getting both sides to align would be a positive step forward and in the right direction for our profession.

What Do Investors Want?

It would be too simplistic to say all investors want to earn money, but they do. Investors typically want to either a) replace the ownership team and take over management of the MSP or b) inject the MSP with capital and retain the current management structure. One of the very first things you should do in your discussions is to determine what the ultimate goal is.

Before you get too far in your discussions, knowing whether the investors want management out or whether management is vital to the ongoing success of the deal is worth knowing.

Long vs. Short Term Goals

As previously discussed, some investors may want to keep your existing management team in place, and others may want a clean break. Beyond whether the leadership stays or goes, investors also have different reasons for investing in an MSP.

Some investors want to do some M&A work to accelerate growth and ultimately sell the company off. Other investment teams prefer traditional organic growth and will be long term investors, seeking some liquidity event beyond a five-year horizon.

Speak the Investor’s Language

In either instance, all investors want to eventually get their money back and see a return on their investment. You must understand their motives and equip yourself with the understanding that allows you to communicate with investors in a way that will maximize your value to them.

Even if investors do not fully understand managed services, having a well thought out strategy will be something all investors understand. MSPs need to be able to convince an investment team that the MSP practice can become a valuable resource for the investment group. Why will buying or investing in your MSP make them money? If you can answer that question, you can speak to investors.

MSPs need to understand the mindset of investment groups to appreciate the mind of the investor fully and capitalize on these opportunities.

Tags : investors,managed services,private equity,venture capital

Post A Comment

Have questions?

We're here to help! Fill out the form below and we will get back to you as soon as possible.

Contact us

Address:

100 Europa Drive, Suite 569 | Chapel Hill, NC 27517

Phone:

1-800-672-9205

Email:

info@MSPAlliance.com

Sign Up For Our Newsletter


By submitting this form, you are consenting to receive marketing emails from: MSPAlliance, 100 Europa Drive, Chapel Hill, NC, 27517, https://www.mspalliance.com. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact