Over the last few years, many MSPs and industry pundits have claimed that our industry is undergoing a rollup. While I’ve consistently argued that the transaction volume has been minimal in relation to the market size — with data supporting my stance — I now believe we are genuinely entering the initial phase of a comprehensive industry consolidation.
So, what’s a rollup?
It’s consolidation. This is when the market has all the attributes to make it attractive to private investors, meaning private equity companies are willing to invest. These attributes include a rapidly expanding total addressable market (TAM), recurring revenue, solid margins, low churn and opportunities for synergy.
The MSP market checks all those boxes for the first time. I estimate that there will be more than 100 private equity or family offices looking to invest in or are already investing in the space. I sit on the board of two platforms for one private equity investor. After three years of involvement, this is not as easy as some investors think it is, and many of these companies will not achieve their desired goals for return on investment.
While it’s difficult to consolidate, we see several successful examples of that scale. By scale, I mean 100 to 300 million in revenue. So, why should you care?
Well, every MSP has the opportunity to create enterprise value at a rate that’s never been possible, and you don’t have to sell your MSP to private equity to unlock some or all of your value. The same factors creating consolidation make growing your business easier. We all benefit from the same market conditions.
I had been saying that this was the gold rush for several years. However, looking back, I realized that was just the gold walk. Now is the gold rush. (If you don’t feel that way, you have some work to do to get yourself there.)
Be aware that your competition is changing and will continue to change. We are up against professional sales and marketing teams with deep technical capabilities. These big companies used to be big and dumb, but not anymore. So, to compete against them requires deep relationships with our current customers, and more focus on go-to-market.
After decades in this business, I’m thankful I can be here to watch this unfold and see the positive impact the current market will have on so many MSPs.
