Selling Your IT or MSP Business in Texas
Looking to Exit an IT Consulting Business?
The time is definitely right to be in the MSP (managed service provider) and IT consulting business.
MSP companies all over North America — a large fraction of which are based in Texas — have been caught in a mergers and acquisitions frenzy in the past few years.
It’s easy to see why. The sector is huge and on the upswing, with profits expected to reach more than $300 billion in five years. This is an expansion rate of nearly 8.1 percent per year. The MSP monthly recurring revenue model brings in more than half of the MSP’s total revenue and guarantees a steady clientele.
At the same time, MSPs are highly fragmented. The 20,000 companies in North America are typically hyper regional and offer specialized services and products.
Therefore, banding with other MSPs — either by selling or buying — can be an attractive prospect for growth (either geographically or by expanding the menu of services).
Why Sell a Business?
Maybe you’ve received an email from an “interested” party, citing a contraction in the IT sector as a reason you should unload your business now.
This, coupled with the news of constant M&A activity in the sector, may give you the impression that the sector is consolidating and poised to decline. This is not the case.
If anything, the sector is expanding, especially if you’re working with clients on an ongoing contract model and not a break-fix model. These are the MSPs that survived and thrived during the COVID-19 pandemic — those who cultivated client relationships and posted strong recurring revenue.
This being said, maybe you’re seeing that the industry is changing in ways your MSP or IT consulting firm cannot keep pace with. If you’re not specializing in cloud computing and cybersecurity, you might find it more difficult to compete with larger companies. Therefore, it’s likely a good time to sell your highly specialized Texas business as more and more small- and medium-sized businesses move to the cloud and look for more all-in-one services.
Additionally, you may be nearing retirement or eying a merger with a competitor. Maybe you want to sell, but also stay involved as an independent consultant. Or perhaps you just want to ride the M&A wave while it is still strong.
No matter the reason for selling, the M&A sector is strong and your business can fetch top dollar if you find the right buyer. So don’t give in to cold pitches that try to undervalue your business — real motivated buyers will see the strengths in your company and be willing to pay a premium.
The MSP Market
- MSSPs (Managed security service providers): Provides expertise related to security processes.
- MASPs (Managed application service providers): Provides the infrastructure and ongoing support for a cloud solution, including hosting client applications in their own cloud.
- MDSPs (Managed data service providers): Design and implement systems to collect information as well as provide security, storage and data backup.
- MISPs (Managed infrastructure service providers): Offers a single server with one set function or virtualization and private cloud services that allow multiple users to control their own network resources.
- MNSPs (Managed network service providers): Covers a large array of capabilities. MNSPs can offer data and voice-management services as well as support for bandwidth upgrades and equipment management.
- If you find yourself interested in selling your Texas-based IT managed services company, there is a steady stream of buyers. You just have to know how to position your company for maximum return.
- Annual Sales (revenue)
- Net Profit
- Annual Average Growth
- Position in the Market
- Customer Funnel
- Physical or Operational Locations
- Assets (your website, proprietary software, social media channels, etc.)
- Dependence on Owner (i.e., Can your consulting firm operate without you, or are you the face of the firm?)
- Internal Operations and Systems
- Liabilities and Debts
- Unique Selling Proposition (i.e., What makes your company better and different than any other one in your niche?)
How to Sell
The MSP business is unique because the real value is in existing client relationships, certifications and the expertise of the staff.
So how do you determine what your Texas MSP business is worth?
Valuing a company comes down to various equations that take into consideration your finances, market conditions and comparisons.
MSPs that offer cyberattack protection tend to attract higher valuations.
For instance, Houston-based Meriplex recently acquired MSP Enhanced Technologies out of California to boost its ever-growing cybersecurity and cloud communications firm. Previously, Meriplex purchased several Texas-based companies, including Plano-based HBR Technologies, Vergent Communications and Preferred Technology Solutions.
In another recent deal, RigNet of Houston (which specializes in cybersecurity and encryption) was purchased by Viasat for $222 million.
After getting a certified business valuation, you’ll continue to define an exit strategy for yourself, your investors and your employees before finding potential buyers. These buyers could be competitors, entrepreneurs — even private equity firms.
Eventually you will have a shortlist of potential buyers before finalizing the deal with one.
Why Hire DBG Advisors to Sell Your MSP or IT Consulting Business
At DBG advisors, we are determined to find the right path for your Texas company’s lucrative exit. We take this responsibility seriously by walking you through the entire process.
We are committed to our clients and customize our services to your needs, timing and budget.
We are experts — with the experience, systems and tools — at getting businesses sold for top dollar. If you’re ready to sell your Texas-based MSP or IT consulting business, contact us today to get started on an exit plan.