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In late September WTA Partners ran a webinar on Cloud Services M&A. In one of the five sessions given by four speakers, Jeffrey Jenner, who leads our Cloud Services practice, presented on “What makes an MSP attractive to an acquirer”. This market view is very much based on that.
We first need to establish a common understanding of what an MSP is. There are many businesses claiming to be MSPs but many of these are VARs with only a small part of their business qualifying. What does it take to be accepted as a Cloud Services MSP and be valued as such rather than a VAR-plus? This primarily comes down to the level of Annual Recurring Revenue (“ARR”) which itself will be a main driver of value. And to be classed as a proper MSP that should be 50% and preferably 60%. The higher the percentage the better. There is, however, a view that the very high weighting put on ARR has lessened because of the move to digital transformation increasing the importance of consultancy and professional services. Also important is the length of the contract with the customer: the longer the period the better too. Three year contract length is the standard and good but longer is even better.
Continue reading our Market View here