You can believe the headlines about MSP acquisitions making a comeback. After M&A activity fell approximately 60% in 2023 due to rising interest rates and economic uncertainty, the market has sprung back. Canalys forecasts M&A activity will jump by 45% in 2025, proof points for optimists who say acquisitions and platform growth promise massive wealth creation. But the complex reality behind those projections rarely gets discussed.
Too many MSP owners enter M&A transactions with rose-colored glasses or focused on the wrong factors. If selling (or buying) an MSP is anywhere on your mental roadmap, those who’ve been there say the money isn’t the hardest part, and the closing transaction often is just the beginning.
1. The Meaning of “Boss” Will Change
"Control is overrated. It's small-scale thinking," said Peter Melby, CEO of New Charter Technologies and GTIA board member. Having the company he co-founded be acquired by New Charter, a private equity platform, reshaped his thinking about control. "I have 1,400 employees that I absolutely cannot control. I can make hiring and firing decisions, but I don't have that purview."
And that’s okay. Melby argues that while most MSP sellers enter negotiations terrified of giving up control, their real focus should be alignment.
"If you have alignment on where you're going, and you can determine what success looks like—not in the transaction, but in the trajectory after the transaction—then life can be radically different post-transaction, and better, not worse," he said.
On the other hand, dumping the boss title altogether might not match expectations. The MSPs who struggle most post-acquisition are those who sell because they're tired of responsibilities rather than excited about opportunities.
"If you're selling because of what you don't want to do, instead of what you want to do moving forward, the identity piece of that is going to be a challenge," Melby said.
2. Playing the Power Game
Most sellers approach M&A from a position of weakness, says Cyft AI co-founder Jeffrey Newton. After recently closing a funding round, he says frame of reference is everything.
"What position do I want to be in as a founder and owner looking to sell a portion of my business? It sure isn't a weak position," Newton said. "Create not only the narrative, but the momentum that you need to be in a position where you can command what you're asking for, rather than being in a position where you have to submit to what someone's going to give."
Newton says he learned this lesson through 60 different conversations with potential investors. And no matter what is said verbally, “Term sheets reveal true colors," he said. "A lot of what is projected, it's a dance between two humans … I don't trust what people say. I rarely trust what people do, but I do inevitably trust the pattern that I observe myself over time," he said. "The money is the easiest part. Who you take it from is probably the most challenging decision."
3. What’s Your Baby Worth?
Whatever amount someone will write a cashable check for is Tim Conkle’s answer when asked about determining business value. Conkle is CEO of The 20, a platform that has acquired 40 MSPs in just under three years. "Everybody thinks their baby is worth more than what it's worth, he said.”
Part of the problem is that sellers get caught up in nebulous metrics like multiples without understanding the full picture. "'Multiple is a vanity metric," add Melby. "Whether I can get 5x or 18x. But of what?” The lifetime value of a transaction that includes ongoing investments can be much greater than the “headline” valuation number.
Sellers can also be misled by advisors who promise the moon but aren't acting in sellers' best interests.
"There are people who are incentivized to tell you that your business is worth more than it is," Melby explained. "By the time you get into the process and whittled down by the horror of the term sheets and 60 bidders, you say alright I'll take what it's worth."
Conkle says such advisors probably aren’t worth dealing with at all. "If it was me and I was a $3-4 million MSP or smaller, why would I give a broker 6%? Because I can go directly to any platform company, and they'll buy the company for a fair price."
MSPs buying peers have even more math to consider. Simply buying another similarly sized company won't create the scale you think it will, says Conkle. Get out your calculator.
"You have to acquire enough to where your multiple changes, otherwise you're buying dying assets," Conkle said. "Let's say you're a million-dollar MSP, you want to buy another million-dollar MSP because you want to be a $2 million MSP. You did nothing but buy dying assets, and probably both had the same problem being that neither one could grow."
4. Integration Integrity
Among metrics that do matter, however, integration is high on the list. Approaches can vary, so parties should focus not on how much is integrated, but how valuable the integrations are individually and in the aggregate. For example, back-office operations are a given, but ticketing systems are not.
"Rule number one is integrate for value, not vanity,” Melby said. “Rule number two is I don't want to integrate anything that's going to be irrelevant in 12 to 18 months," such as the help desk.
Conkle says The 20 prioritizes customer impact, knowing that customers do not like change. "We try to think about how we can make this the most frictionless, painless thing for the customer. Because if you buy someone and you don't keep the customers, it doesn't matter."
In response, his group pre-integrates 80% of operations before acquisition, including RMM, PSA and help desk functions, leaving only accounting to integrate post-transaction. "If you really look at The 20 as a group, it looks like one big company that does everything the exact same way,” he said.
5. The Unspoken Transformation
Everything that will happen to the business is detailed on paper, but what about the changes a selling founder will experience? "You have to be really comfortable becoming someone you've never been before. And that never stops," Newton said.
Of course, successful transactions can create positive change. "I've got guys that we bought that had never been on a vacation," Conkle said. After acquisition, they’re able to take a healthier approach to their business. And rather than rowing alone, being part of a platform can give a sense of collective momentum that relieves an owner’s pressures.
The complete opposite may also be true. Personal challenges could just as easily be exacerbated as solved, new wealth can have unexpected impacts, and shifting professional identities might be hard to swallow. "Whether it's money, whether it's time, whether it's a bigger job or a different job, it's going to cause ease and stress in different ways," Melby said.
Getting the Timing Right
The MSP M&A market is bubbling, but it won’t stay hot forever. Even if right now feels like the time to make a move, the insights above show that a long-term view is critical at every stage.
Success requires honest self-assessment, realistic expectations and a shared vision for the future. "Buyers and sellers are in this together," Melby said. "Get on the same side of the table about what you're trying to build."
Most importantly, it requires understanding that nearly everything changes in a transaction, so in a way, the deal is just the beginning. The real value creation happens in the years that follow. That's entirely dependent on how well sellers can face the reality of where their business today and own a vision of where it can go. The big promise becomes real with buyer and seller align on where they're going, and head there side-by-side.
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