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Private equity is ready to take MSP consolidation to the next level – FiratNews

Private equity is ready to take MSP consolidation to the next level – TechCrunch

The outlook for managed companies suppliers (MSPs) stays optimistic, as rising complexity and safety considerations — pushed by the work-from-anywhere atmosphere and high-profile hacking incidents — have moved IT administration from being a price middle to a core strategic precedence for the C-suite.

A key driver of the expansion of such suppliers is the truth that the requisite abilities wanted to handle and safe advanced IT environments are in excessive demand, making it troublesome for a lot of companies to develop and keep inside IT groups which might be as much as the duty.

In consequence, an rising variety of corporations will proceed to outsource some, or all, of their IT administration to extremely expert managed service suppliers. Some business insiders estimate that solely 30%-40% of the managed companies market has been penetrated, so there’s a big hole that MSPs can fill.

Personal fairness buyers have taken discover of those tailwinds and lots of are extremely concerned about investing within the sector, which is able to gasoline the presently ongoing consolidation.

MSPs have all of the elements that personal fairness loves — a robust demand pattern, low danger of obsolescence, a “sticky” service that pulls long-term prospects and excessive recurring revenues, sturdy money stream margins and a comparatively “asset-light” enterprise. As well as, with roughly 40,000 MSPs within the U.S. [as of 2019], the business stays very fragmented, leaving large alternatives for personal fairness gamers to construct massive corporations by way of acquisitions.

Many personal fairness corporations are already invested within the sector. Cowen tracks roughly 50 personal equity-owned MSPs, a lot of which have already acquired different MSPs. The desk under exhibits a number of such personal equity-backed MSPs which might be anticipated to be catalysts for continued consolidation within the sector. Most of those corporations have already accomplished a number of acquisitions.

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