Buying an MSP
Why Searchers Target MSPs
Managed IT services offer what most Main Street businesses cannot: genuinely contracted recurring revenue, asset-light operations, and customers who churn reluctantly because switching providers is painful. The same traits attracted institutional consolidators years ago, and 2025 reporting counts hundreds of MSP acquisitions in North America. A searcher wins the deals consolidators skip: smaller, owner-run shops below the platform threshold, bought on relationship and continuity rather than auction dynamics.
What the Market Pays
The publisher's IT and software services class, whose scope names managed service providers first, puts half of sold businesses between 2.20x and 3.87x SDE across 2021 to 2025, with a 2.93x median and a $700,000 median sale price. The same publisher's asking-price median runs well above that, at 4.08x. Advisory roundups quote 4x to 5x EBITDA for small MSPs, higher again on a smaller earnings base, so read that as the sell side's. The recurring mix moves the multiple more than size does: ask every listing for the managed-versus-project split before discussing price, because a shop billing mostly hourly project work is an IT contractor whatever the listing calls it.
Recurring Revenue Deserves Real Diligence
The multiple you pay assumes the contracts hold, so verify the assumption: read the actual agreements for term, auto-renewal, price-escalation, and termination-for-convenience clauses; reconcile monthly recurring revenue to invoices rather than the seller's summary; and compute churn over trailing years, both logo and revenue. Customer concentration deserves the same scrutiny as any business, with the added wrinkle that one anchor client's IT decision can be made by a single person changing jobs.
The Stack and the People
An MSP's operating system is its RMM and PSA tooling plus documentation. In diligence, confirm which platforms the business runs, whether licenses and configurations transfer, and how complete the client documentation actually is, because tribal knowledge walking out the door is the MSP version of the owner keeping the customer relationships. Key-engineer risk is usually the sharpest people issue: identify who holds the senior certifications and client trust, and price their retention into the deal.
Security Posture Is Now Deal Risk
MSPs hold privileged access to their clients' systems, which makes the target's own security posture a liability question, not an IT preference. Review incident history, cyber insurance coverage and claims, client contractual liability for breaches, and basic hygiene (MFA enforcement, access management, backup testing). A cheap MSP with weak controls can carry the industry's most expensive tail risk.
What to Verify in Diligence
The sections above each name their own checks; this is the rest of the list. Reconcile monthly recurring revenue to invoices rather than to the seller's summary, and separate it from project and hardware-resale revenue, which is lumpy and priced differently. Compute gross margin per client, because an MSP with a few unprofitable anchor accounts looks fine at the top line and is not. Confirm that tooling licenses and client configurations actually transfer, that engineer employment agreements and any non-solicits survive the sale, and that the seller's own security posture, incident history, and cyber cover are what the contracts with clients say they are.
Financeability Notes
Contracted recurring revenue reads well in an SBA lender's cash-flow analysis, and MSP deal sizes commonly fit the 7(a) envelope. The asset-light balance sheet means the loan rides on earnings quality rather than collateral, so lenders lean harder on contract review, concentration, and the owner-transition plan. Model debt service against revenue net of the churn you actually found, not the trailing twelve months as marketed.
Terms in This Industry
Ticket load per endpoint
How many support tickets a managed device generates in a month, on average.
RMM and PSA
The two platforms an MSP runs on: one watches and fixes client systems, the other bills the work.
Technology stack
The standard bundle of tools and vendors an MSP deploys across every one of its clients.
Rate per seat
What a managed contract charges per user each month, the number the whole book is built on.
Vendor consent gate
The vendor's written approval, needed twice over: for the agreement and for every resold seat.
What the Data Says
The Service Leadership Index 2026 annual profitability report finds valuations and valuation multiples for best-in-class IT solution providers at record highs in 2025, with roughly a 15% enterprise-value gain for the average provider over 2024; market temperature, not a comp for any one MSP.
Source: Service Leadership Index 2026 Annual IT Solution Provider Industry Profitability Report
The same benchmark puts best-in-class providers at 19% or better adjusted EBITDA for a sixth consecutive year, against MSP revenue growth of 9.6% and adjusted EBITDA growth of 17.1% in 2025, which is why buyers pay for margin quality and operational discipline rather than top-line alone.
Source: Service Leadership Index 2026 Annual IT Solution Provider Industry Profitability Report
Drake Star's quarterly MSP report counts 466 MSP M&A deals in 2025 at $4.3 billion of disclosed value, about 20% more than 2024. The tracker is worldwide, so it sizes the consolidation wave a searcher bids alongside and is not a count of American targets.
Enter earnings to apply this industry's cited band.
A sanity check against asking prices, not a valuation.
Margin context, from IRS Schedule C aggregates (TY2023): computer systems design services ran a 37.0% net margin across all filers and 51.2% among profitable ones; a listing far above the second number is making a claim about add-backs. Both figures and their caveats are on Industry Economics.
Holding a live deal in this industry? Underwrite it with the comps, cited band, and charge-off rate pre-loaded.
Compare bands across industries in the cited multiple bands by industry.
Who Else Is Buying in This Industry
- Alpine Investors · San Francisco, CA · runs a searcher program
People-first private equity behind Apex Service Partners, the country's largest HVAC, plumbing, and electrical consolidator. Its CEO-in-Training program hires operators into the businesses it buys.
- OSIT (into Evergreen) · 2026 · An employee-owned MSP joining Lyra under Alpine's Evergreen, the platform that bought 33 MSPs in 2025 alone.
- Prospect Partners · Chicago, IL
Calls its target the pre-middle market, which is genuinely small: the range where a self-funded searcher is a real rival bidder. Fund V closed at $225M.
- C2 Computer Services (into Entech) · 2026 · A Coral Springs managed-cybersecurity and IT provider, extending Entech across South Florida.
- 1 more confirmed on the firm's profile
- Evergreen Services Group · San Francisco, CA · runs a searcher program
The managed IT trade's most prolific buyer, and a permanent one: it says it never divests, pays all cash, closes inside ninety days, and passed its hundredth acquisition in its seventh year.
- ImageQuest · 2025 · A Nashville managed IT, cybersecurity and compliance provider joining Lyra, its founder staying on as chief executive.
- 1 more confirmed on the firm's profile
Buyers is the shelf these come from, ordered by who closed something most recently.
What It Costs to Replace the Owner
The multiples above are quoted on SDE, which adds the owner's pay back into earnings, so they hold only if you do the owner's job. Hire someone instead and the going rate for the role comes back out. For this trade that is usually the technology manager who owns delivery, paid a median of $175,140 a year nationally. Subtract it from SDE before applying any multiple, because at a 3x multiple that wage also takes about $525,420 off what the business is worth to you.
Computer and information systems managers, BLS Occupational Employment and Wage Statistics (2025), national, all industries, before payroll taxes and benefits. Every role, and the same arithmetic worked end to end, is in Manager Wages.
The Numbers That Run This Business
- Monthly recurring revenue and churn
- Revenue per endpoint or seat
- Contract renewal calendar
- Ticket volume per technician
- Client security posture exceptions