MERGERS? ACQUISITIONS? Sure, there have been plenty involving MSPs lately. But then again, asks Charles Weaver, when has that not been the case?
“We certainly have slight increases in the ebb and flow of M&A activity,” says Weaver, CEO of membership group MSPAlliance and an industry observer with two decades of experience. “This is not, in my opinion, any more unique than we’ve seen in other periods.”
Perhaps, but it sure feels to Chris Hoose like something has changed recently. “I’ve been in this since 2001, and in the last three years the number of phone calls that I have taken trying to buy my company has grown exponentially,” says Hoose, vice president of communications at Iconic IT, a Dallas-based consortium of MSPs with locations in five states. “There’s always been M&A activity, but it’s much, much more active than it’s ever been.”
He’s not imagining things, either, according to Paul Dippell, CEO of Service Leadership, a managed services consultancy based in Plano, Texas. “There’s a ton of M&A going on, and it is way, way higher than historical,” he says.
Dippell can prove it too. His firm collects data quarterly from thousands of MSPs, 80% of whom are in the U.S. In 2016, he says, just over 32% of those firms had gotten more than five calls in the previous year from people interested in buying their business. In 2019, by contrast, that figure stood at over 53%, with greater than 36% receiving more than 10 inquiries.
“They’re not calling for their health,” says Dippell of all those would-be buyers. “They’re not calling to kick tires, because it’s expensive to call. They’re calling to buy.”
Some of those buyers, moreover, are calling on behalf of MSPs with regional and even national footprints, like NexusTek, which is backed by $77 billion private equity firm Abry Partners, and NuMSP, which has bought 13 managed service providers since its founding last year.
The rise of such firms worried Hoose when he was on his own running Choose Networks, an MSP in Wichita, Kan. “I always thought about how do I compete with someone that is potentially 10 times my size?” he recalls. Three members of the peer group he participates in had the same concern, which is why they joined forces this July to form Iconic IT.
“This is a viable way for us to have that size and buying power, and ability to improve the sales process and marketing process, and all the things that larger companies have the ability to do better than small companies do,” Hoose says.