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MSPs And Private Equity: What Makes An MSP Stand Out From The Pack?

‘I think cultural fit is something that is extremely important. And in terms of the technical stuff, we look from a customer perspective at what customers want. We want to see really good retention rates. We want to see a diverse customer base,’ says Briton Burge, principal at Rosewood Private Investments.

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Private Equity 101  

Private equity is becoming an increasingly important force behind the growing consolidation among MSPs. The past couple of years have seen dozens of MSPs either merge or get acquired, and those deals increasingly have been done with private equity firms providing the funding.  

This has been most evident in the rising number of platform acquisitions, which happen when a private equity firm acquires one MSP with the intention of using it to do more MSP acquisitions. They then roll up several smaller MSPs into a larger MSP that can leverage its size to compete in what has traditionally been a very fragmented market for managed services.  

Indeed, there are likely now over 100 platform MSPs vying in this fragmented market, said Abe Garver (left, in photo), managing director and MSP team leader at Focus Investment Banking, a Vienna, Va.-based midmarket investment bank. Garver, speaking on a panel at CRN parent The Channel Company’s XChange 2022 conference, said it started in about 2014 with some of the first private equity investments into MSPs and really took off in 2018 when Evergreen Services Group made the first of four platform acquisitions.

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Garver was joined on stage by Karl Muehlberger (center), chief compliance and audit officer at DSM, a Lakeland, Fla.-based MSP with a state and local education focus, who discussed his company’s journey to working with private equity, and Briton Burge, principal at Rosewood Private Investments, a Dallas-based private equity firm that in late 2020 acquired General Informatics to use as a platform for further acquisitions.  

There are big changes coming to the MSP sector, and outside money is driving a lot of those changes. Read on to learn more about how private equity is driving it and how MSPs can take advantage of these firms’ hunger for recurring revenue.

 
 
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