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The View from Private Equity: Why Managed Services is an Attractive Opportunity

Private equity investor Philip Vorobeychik (pictured) explains why investors like him are pouring billions into vendors that serve MSPs, and what that trend means for the managed services market. By Rich Freeman

We’ve all seen the headlines. Thoma Bravo buys Continuum. Thoma Bravo buys ConnectWise. Vista Equity Partners buys Datto. Insight Partners and TPG invest $500 million in Kaseya. And the targets of those acquisitions then go on to buy what sometimes feels like every smaller vendor within reach.

It’s one of the biggest developments in the still relatively short history of managed services. Vendors who serve MSPs are attracting billions of dollars in private equity capital, and then using large hunks of that money to underwrite a seemingly nonstop wave of mergers and acquisitions. What’s behind it all, where is it headed, and what will it ultimately mean, both to vendors and the MSPs who buy from them?

Who better to ask than a private equity investor? So we asked one.

Philip Vorobeychik is a managing director of Vertica Capital Partners, a young private equity firm headquartered in New York that’s just now beginning to invest its more than $200 million in software companies, including software companies that serve MSPs. Why are he and so many others pouring so much money into the managed services market?

“MSPs are getting asked to do more things, and that creates a good investment environment,” says Vorobeychik.

SMBs, he elaborates, are taking more and more of their technology needs to managed service providers. Those service providers, as a result, need more and more tools. And that, broadly speaking, portends good things ahead for both tool makers and their owners.

Indeed, Vorobeychik is surprised it’s taken investors this long to wake up to the managed services opportunity. “If you look at just the amount of funding in other sectors with the same total addressable market opportunities, it was higher traditionally than where the MSP market was,” he says. “That’s not true anymore.”

A one-time IT provider himself, Vorobeychik has been in and around managed services long enough to appreciate the significance of that change. “I have a little bit of a personal affiliation to it and deep understanding of the need,” he says. He’s been in the private equity world for the last eight years, much of it at Insight Partners, which made its first big investment in Kaseya back in 2013. Vorobeychik served on Kaseya’s board for a time, but no longer has a connection to the company.

Even so, he points to Kaseya as an example of the good private equity can do. Presently valued at $2.25 billion thanks to its latest funding round, Kaseya is in the midst of an acquisition spree that has significantly expanded its software portfolio. “I think that Kaseya now, in the last couple of years, has benefitted tremendously from an investor and a base that wants to see that business grow,” Vorobeychik says.

More generally, he says, the money that investors like Vertica put into managed services vendors helps them accelerate product development, fix bugs faster, and hire more support resources. “That’s a great thing,” Vorobeychik says, and not just for the vendor and its owners. MSPs benefit too.

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