Private equity firm Centerbridge Partners may be looking to sell Ahead Inc. -- an enterprise and cloud MSP, a Reuters report asserts. Ahead Inc. joins a growing list of massive MSPs that apparently are up for sale. The others include:
Ahead's anticipated financial metrics for 2022, according to the report, include:
- Revenue of $2.5 billion, up from $2.2 billion in 2021;
- Earnings before interest, taxes, depreciation and amortization of more than $230 million.
The asking price apparently is roughly $3 billion -- or roughly 13X annual 2022 EBITDA estimates.
Neither Ahead nor Centerbridge were quoted in the report.
Ahead's Private Equity Ownership, Earlier Acquisitions
Centerbridge Partners has owned Ahead since 2020. The cloud MSP has grown organically and through acquisitions. Ahead purchases have included:
- Acquiring vCORE Technology Partners — an IT solutions provider in Scottsdale, Arizona -- in May 2022.
- acquiring Vertical Trail in 20221;
- acquiring Platform Consulting Group in early 2020;
- acquiring RoundTower Technologies and Kovarus in September 2020.
- merging with Data Blue while acquiring Sovereign Systems in late 2019; and
- acquiring Link Solutions in July 2019.
Multiple Big MSPs, CSPs Up for Sale?
Ahead joins multiple major MSPs and cloud service providers that apparently are up for sale and/or considering exits. Other potential deals include:
- Cincinnati Bell seeking to sell CBTS — an MSP & MSSP that offers UCaaS, cloud & cybersecurity services.
- Private equity firm BC Partners may be looking to sell Presidio, a major IT solutions provider that has cloud MSP, MSSP and cybersecurity capabilities.
- Rackspace has been evaluating strategic alternatives and options since May 2022. The multi-cloud MSP reorganized at that time, and expects to share Q2 2022 results on August 9, 2022. We suspect Rackspace may provide an update on the strategic plan -- including potential asset sale considerations -- in time for those earnings.
Why MSP Valuations Remain Reasonably Strong
MSP and MSSP valuations have held up well — despite plummeting SaaS company valuations on Wall Street. Why’s that?
- Generally speaking, MSPs and MSSPs have always been valued based on their EBITDA (earnings before interest, taxes, depreciation and amortization). Sure, there are additional valuation metrics. But M&A in the MSP market has largely been a profit-based conversation for more than a decade.
- Meanwhile, SaaS companies until recently were largely valued based on their annual recurring revenue (ARR) — and many SaaS investors ignored bottom-line profits.
Still, the overall managed IT services sector certainly is not recession proof. The evidence: Even in a healthy economy, roughly 25 percent of MSPs are break-even or losing money each quarter, according to Service Leadership Inc., a ConnectWise business. Certainly, those money-losing service providers could face cash-flow pressures if their customers cut per-user head counts or scale back recurring services.
On the flip side, some pundits argue that MSPs can benefit during a recession. The thesis: As mid-size and enterprise businesses scale back their own IT hiring, they’re more inclined to outsource IT services to MSPs and MSSPs. The thesis makes sense and may give some high-performance MSPs a lift. But we don’t think a recession would cause an overall tidal wave of IT outsourcing opportunities.
