Navigating M&A Trends in the MSP Industry: Insights and Strategies

There’s been a lot of talk about a slowdown in global channel M&A activity in 2023—indeed, our recent MSP Horizons Report, which we did in conjunction with Canalys, highlighted a 60% decline in M&A compared to previous years. Another trend the report observed is a disparity between buyers and sellers in the market. While 44% of MSPs are looking to acquire, only 13% are actively (and openly) seeking to sell. In a recent podcast, I talked to Matt Takhar, Business Development Director at N‑able, to find out what’s been driving these changes.

“From my perspective, it boils down to caution,” Matt explains. “The economic landscape is uncertain, with recessionary pressures looming in many countries. Borrowing money isn’t as easy or cheap as it used to be, which means people are taking a much more conservative approach to M&A.”

But he believes there’s still a silver lining: “Despite the caution, M&A activity is still happening. In fact, we’ve already tracked 90 M&A deals this year alone,” he adds.

So what’s the takeaway for MSP business owners contemplating M&A? “It’s simple: tread carefully, but don’t sit on the sidelines,” says Matt. “The tide may be turning, and strategic acquisitions could be the key to positioning your business for success in the long run.”

He continues: “Looking ahead, we anticipate M&A activity to pick up steam, especially as we move into 2025 and beyond. So now’s the time to start thinking strategically about your next move. Whether you’re considering buying another MSP or exploring the possibility of selling your own business.”

Matt offered a few tips to keep in mind if you’re looking to keep an eye on acquisitions moving forwards:

1. Due Diligence is Key: Before making any big decisions, do your homework. Dive deep into the financials, operations, and culture of any potential acquisition target. And don’t be afraid to seek expert advice if you’re feeling out of your depth.
2. Consider Structural Models: Think carefully about the structure of your deal. Are you leaning towards a centralized model, where you fold the acquired MSP into your brand? Or does a decentralized approach, with multiple MSPs operating under their own brands, align better with your vision? Each model has its pros and cons, so choose wisely.
3. Understand Motivations: Whether you’re buying or selling, it’s crucial to understand the motivations of all parties involved. What are your goals and objectives? What are the deal-breakers? Clear communication and alignment of interests are essential for a successful transaction.

Matt concludes, “While the M&A landscape may seem uncertain at times, there are still plenty of opportunities for growth and expansion in the MSP industry. By staying informed, thinking strategically, and approaching deals with caution and diligence, you can navigate the complexities of M&A and emerge stronger on the other side.”

To listen to the full conversation and get more details on some of the things we mentioned here, check out the full Beyond the Horizons Podcast here.