Merger and acquisition (M&A) activity continues to intensify worldwide in the IT services sector -- with MSPs, CSPs, ISVs and other companies negotiating and/or announcing buyout deals in recent days.
Among the six M&A deals involving managed services providers (MSPs), independent software vendors (ISVs) and other IT-centric firms that we've spotted this year:
6. M&A Rumor - Software Development: Cognizant is in talks to acquire Softvision for as much as $550 million, Reuters says. We think the deal has actually happened but we await public confirmation.
5. M&A - Non-Profit IT Services: Tech Impact, which provides IT training programs for underserved youth, has merged with Idealware, a nonprofit organization that offers independent, thoroughly-researched technology resources for the social sector.
4. M&A - Cloud Software Consulting: Nortal has acquired Dev9, a Seattle-based software development consultancy specializing in cloud modernization. We'll share more details soon.
3. M&A - IT Services: Central Office Systems is merging with Attivo. We'll share some deeper analysis soon.
2. M&A - MSSPs & Cyber Consulting: Evolver and eVigilant have merged to form Converged Security Solutions, an MSSP focused on federal and commercial customers. MSSP Alert has details that we'll share soon.
1. M&A - Global Deal: Europe's Computacenter has acquired Fusionstorm, the major IT solutions provider in the U.S. Computacenter will pay US$70 million up-front, and up to $20 million more if FusionStorm hits certain EBITDA and gross profit targets during a 15-month window after the buyout is completed. Computacenter debt facility of £100 million, and from the Group’s existing cash resources as required. Deal's Valuation: For its fiscal year 2017, FusionStorm had an EBITDA profit of $12.1 million (on a proforma adjusted basis, Computacenter estimates). That puts the deal's potential valuation at 7.4 times EBITDA ($90 million divided by $12.1 million), a reasonable price for an MSP these days.
MSP M&A Activity Explained
ChannelE2E has tracked more than 100 M&A deals so far involving VARs, MSPs, CSPs and other types of solutions providers. Industry demographics, with an eye toward the age of business owners, suggest that the M&A activity will grow even stronger through at least 2022 before leveling off sometime thereafter.
Technology companies that market to MSPs, in particular, have been adjusting the marketing, education and communications to address M&A trends.
The upcoming ConnectWise IT Nation Connect conference, set for November in Orlando, will include multiple sessions on M&A. Kaseya is expected to continue its recent M&A forums for MSPs in the months ahead. And Datto has developed eBook content to help partners understand M&A variables.
At last week's Continuum Navigate conference in Boston, Continuum CEO Michael George predicted that 20 percent of U.S. MSPs will ultimately control 80 percent of U.S. managed services revenues. The forecast, George says, involves a range of factors -- including private equity and M&A deals that allow certain MSPs to gain scale across the top 107 U.S. metropolitan areas (based on population).
Stay tuned to ChannelE2E and MSSP Alert for more updates on each of the above-mentioned deals.
