For businesses valued from $5M to $100M+
Considering selling your IT services business?
Managed service providers are valued on contracted monthly recurring revenue and the stability of the client base. The gap between a well-run MSP and a break-fix shop is among the widest valuation gaps in any sector we work in.
- Monthly recurring revenue
- MRR as a share of revenue
- Contract length
- Seat and endpoint count
- Client retention
- Managed services gross margin
- Technician utilization
- Security posture
- Adjusted EBITDA add-backs
What IT services buyers are actually underwriting
Monthly recurring revenue is the number that drives the valuation, and buyers define it narrowly. Contracted managed services under a term agreement counts. Project work, hardware resale and time-and-materials support largely do not.
Retention is the second half of the equation. Three years of logo churn tells a buyer more about the business than any margin analysis, because it reveals whether clients stay when nothing is being sold to them.
Security posture has become a diligence item in its own right. Any incident history that surfaces late will reprice a deal, and occasionally end it.
What gets examined closely
- Monthly recurring revenue and its share of total revenue
- Contract length, auto-renewal and price escalation terms
- Seat or endpoint count and revenue per seat
- Client retention and logo churn across three years
- Gross margin on managed services separately from projects and hardware
- Technician utilization, ticket volume and efficiency
- Vendor and tool stack, and what consolidating it would cost a buyer
- Security posture, and any incident history
Who buys MSPs and IT services companies
Private equity platforms and their add-ons
MSP consolidation is well capitalized and continuing. Platforms pay for MRR and retention, and they will separate your revenue into contracted and non-contracted buckets themselves if your reporting does not do it for them.
Strategic acquirers
Larger MSPs and IT services firms buying clients, geography or a vertical specialty. A strategic with the same tool stack can integrate faster and may pay for the reduced friction.
Which type of buyer suits you depends less on the multiple than on what you want afterward: a clean exit, a second bite through rollover equity, or a few more years running the business with someone else's balance sheet behind it. That is worth deciding before you go to market rather than during.
- Hardware resale counted as revenuePass-through hardware carries little margin, and buyers strip it out before applying a multiple
- Month-to-month client agreementsRecurring revenue without a contract term is valued closer to project work
- An unexamined security incident historyUndisclosed incidents surface in diligence and reprice the deal at the worst possible moment
Where IT services owners lose value
Almost always in the same three places, listed alongside. None of them are inevitable, and all three are decided well before a letter of intent is signed.
Separating managed services revenue from projects and hardware in your own reporting, a year ahead of a process, prevents a buyer from doing it less generously.
Request a confidential valuation.
An advisor who works with MSPs will review your business and give you a real range.
- No cost, no obligation, strictly confidential
- Grounded in what buyers in your sector are paying now
- Useful whether you sell next year or in five