In recent years, there has been a discernible increase in the number of managed service providers (MSPs) that have sold their businesses to larger firms and hedge funds. This trend of MSP mergers is happening in many different parts of the world. And there is no indication that it may begin moving in another direction soon.
What are the Big Corporations Trying to Achieve by Acquiring MSP Companies?
Due to the exceptionally high profitability of the managed service provider (MSP) industry, large IT organizations are aggressively pursuing mergers and acquisitions. Currently, the market has a value of $223 billion, but analysts anticipate that by 2025, it will have reached $330 billion. Hungry corporations are aware of the significant expansion opportunities presented by the MSP sector, but not all are interested in beginning their businesses in this space. Why start from scratch when there are so many MSPs willing to sell?
In addition to this, these businesses are betting on the perception of having options. They take control of many MSP companies while maintaining the names of those organizations in the process. As a result, people mistakenly believe they have a wide selection of MSPs to choose from when many of these MSPs belong to the same conglomerate.
Consider the company Accenture. In 2023, they will have already completed the acquisition of eight distinct IT provider businesses. The public has the impression that these managed service providers (MSPs) are competitors in their field, but Accenture benefits financially from all of them. The 20 MSP, which has already amassed seven MSPs up to this point in the year, follows closely behind in second place.
What factors contribute to the decision of MSP owners to sell their businesses?
Considering the circumstances at hand, the owner of the MSP may conclude that selling the business to the MSP mergers is the most prudent thing to do in these circumstances. Overworking, poor health, retirement, disagreements with company partners, and switching to a different area of work are the most often cited reasons for those individuals’ decisions to do so.
At first glance, it may appear that everyone involved will come out on top, but this impression is dispelled as one considers how the scenario will affect the client companies of the MSPs that were acquired. Yes, we are referring to companies that are comparable to yours. What happens when a large corporation unexpectedly acquires the MSP you have chosen to work with?
The Aftermath of MSP Mergers for Their Client Companies
IT firms consider various factors before deciding to sell, but the most significant one is often financial gain. Regardless, of any potential benefits it may have had for the company, the acquisition almost always hurts the customers. These large firms assure their customers that they will continue to receive the same level of service that they have come to expect from it over the years. The reality is that everything will shift, and these shifts won’t necessarily be for the better.
As a business owner, you put significant trust in your MSP to handle all your digital activities. You’ve likely stuck with them all this time because they offer great service, you get along well with the IT guy assigned to you, and the company is located close to you.
But what if you wake up one morning to find everything has changed? After an acquisition, a decline in the quality of the service provided is rather typical. It’s possible that instead of being a favorite customer, you’ll become one of hundreds, or perhaps thousands, of other customers.
As a result of the management shakeup, you will likely be with an entirely new IT team with people you have never met before. The fact that these experts are typically located many miles away from your physical location and can only provide service to you virtually is an additional frustrating factor. They are free to come to you, but you will be responsible for paying their transportation costs. You do not want that by any stretch of the imagination!
What to Do If Your MSP is Being Bought Out By MSP Mergers
When you discover that your Managed Service Provider (MSP) is a potential target for acquisition, you will have two options: You can choose to remain with them and hope for increased stability or explore the possibility of switching to a different service provider. If you decide to stay, remember that the new owners are likely to have an interest in maintaining your business. This presents an opportunity for you to voice your concerns and provide input to help them make improvements that align with your requirements.
You are free to switch to a different service provider whenever you like; but, if you believe that the quality of service offered by your existing MSP has dramatically deteriorated and no longer fulfills your expectations, you can make the transfer at any time. Despite the ongoing trends of mergers and acquisitions in the information technology industry, there are still local MSPs that are still not merging. It is worth exploring what other options are available to you.
At our company, we would be happy to assist you in navigating this situation. We can discuss your requirements and potentially offer you the services you need if given the opportunity. It may surprise you to learn about the large corporations that have acquired Managed Service Providers (MSPs) in 2023. This ongoing acquisition trend has undoubtedly impacted small firms. For more information on the subject, you can refer to our infographic on 2023 MSP Acquisitions.
If you are unsure about the terms of your agreement or how to proceed, we encourage you to contact us today. Our team will guide you through the process and provide any necessary assistance. You can find our contact information on our website’s contact page.