The general valuation range for MSP is roughly 3 times to 5 times EBITDA (earnings before interest, taxes, depreciation and amortization), with some highly specialized MSPs fetching as much as 7 times EBITDA, according to one private equity expert who has evaluated a range of deals in North America. Small companies, slow-growth MSPs with reliable recurring revenues are at the 3X EBITDA level; high-growth MSPs with at least 50 percent of revenues recurring can fetch the 5X (and sometimes higher) premium, the private equity expert indicated.
Admittedly, valuations can vary dramatically based on a company's region, management, target customer base, and other variables. And some aspiring MSPs -- let's call them break-fix resellers who do remote management -- aren't fetching any premiums, according to multiple MSP executive sources. Many of the recent reseller buyouts -- positioned as MSP acquisitions -- involve zero dollars up-front and multi-year earnouts based on the acquired company's long-term EBITDA and growth rates.
A disclaimer: Treat the information above as "informed speculation" rather than concrete guidance. Opinions about MSP valuations continue to vary drastically -- especially among potential buyers and sellers.
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