While business mergers and acquisitions sagged a bit across the overall technology services marketplace in the third quarter of 2024, M&A activity in the MSP space did well, according to a new update from M&A advisory firm and investment bankers Solganick & Co.
The latest market update followed M&A activity within Solganick’s technology services industry report, which includes application partners, cybersecurity services providers, data and analytics consultancies, MSPs, public cloud partners, and software development firms.
Interestingly, the growth in MSP M&As in the quarter arrived even as the overall M&A activity in the full technology services sector fell compared to the first and second quarters of 2024, Christian Cummins, an associate with Solganick & Co., told ChannelE2E. There were 350 overall tech services M&A transactions in Q3, compared to 447 in Q2 and 365 in Q1, the survey showed.
“Deal volume in MSPs was a bright spot within IT services M&A in Q3 with over 80 transactions,” said Cummins. “The broader IT services M&A market was depressed as financial buyers waited out Fed decisions and election results. However, MSP consolidators were very active and bolstered the market.”
The healthy M&A numbers for MSPs in Q3 were not surprising, he added.
“MSPs are a financially attractive sector generally – [with] recurring revenue, potentially strong margins, [and they are] defensive and scalable – with strong secular tailwinds at this point in time,” said Cummins.
“MSPs are a strong and uniquely insulated business with upside potential, both as a rider on economic tides and as shifts into cloud, and [other services] create demand,” said Cummins. “We expect to see strength in the sector as well as in IT services generally as M&A rebounds in Q1 2025.”
MSPs Continue as Important Links to Services for SMBs
The use of MSPs to outsource fundamental IT support services to SMBs and other businesses “is increasingly common within all industries, a trend expected to continue as the underlying complexity and breadth of technology increases,” the Solganick market update reports.
And the MSP segment is continuing that growth “in a rapid state of consolidation," with more than 60 listed MSP M&A transactions in the U.S. alone since the start of 2024, the survey continues.
Adding to that evidence is that technology research firm, Canalys, said it expects MSP M&A activity to grow by 50% in 2024, which will bring it back to 60% of 2021 pre-pandemic levels, the Solganick report continues.
The data for the Solganick Market Update was gathered from a bulk export of Technology Services M&A transactions information by announcement date from S&P Capital IQ as well as commentary from various M&A news outlets, said Cummins.
MSP M&A Highlights from the Solganick Market Update
Some of the MSP M&A deals announced in Q3 included Kingsway Financial Services Inc. acquiring MSP Image Solutions for $19.5 million in a diversification play and Magna5, a provider of managed IT, cybersecurity and cloud solutions for SMBs, acquiring FullScope IT, a managed IT services business with a strong presence in eastern and southwestern United States, according to the report. In addition, MSP Dynamic Edge was acquired by New Charter Technologies, a portfolio company of private equity firm Oval Partners.
Solganick is a data-driven investment bank and mergers and acquisitions (M&A) advisory firm focused exclusively on software and IT services companies. The company specializes in managing and executing sell-side and buy-side M&A transaction processes to increase shareholder value.
