MSPs looking to snare private equity investment should be aiming for at least 50 per cent recurring revenue, according to a private equity (PE) executive who will be taking your questions at CRN's upcoming MSP North conference.
Nicki Boyd, a partner at Apiary Capital, is one of four PE luminaries who will sit on a panel examining how MSPs can maximise their value in the eyes of PE investors, a hot topic considering the huge volume of private equity cash flooding into the sector.
GCI, Arcus Global, Pinacl and G3 Comms are among the MSPs that have bagged PE cash in recent months, the latter from Apiary itself in March.
But Boyd said MSPs must demonstrate revenue visibility if they are to attract investment, at least from Apiary - a relatively new PE house that closed its first fund last year.
The high level of recurring revenues inherent in the MSP model is driving the influx of PE cash into the sector, Boyd (pictured below) said.
"PE investors like to have our cake and eat it - meaning [we want both] downside protection and growth," she said.
"If we can sit there on 1 January and see 50, 70, 80 per cent of revenues for the year, that is one of the core attractions of investing in this sector in the first place, and why many traditional VARs and project-based businesses are shifting towards providing managed services. From an Apiary angle, it needs to be at least 50 - probably more like 60 - per cent at the bottom end."
Businesses that have failed to demonstrate forward thinking on cloud may find it harder to secure investment, Boyd added.
"One of the attractive qualities of G3 is they have expertise in large, complicated, legacy Avaya systems, as well as great expertise in taking customers on the journey to that cloud-based world. They spotted that trend early enough to build up the capability," she said.
Joining Boyd on the private equity panel will be (pictured, top, with Boyd, from left to right) LDC's James Morris, Charterhouse's Mehul Patel and Livingbridge's Mo Aneese.
These private equity executives will be taking questions from CRN editor Doug Woodburn as well as those MSPs present.
Private equity's mixed reputation (we all recall Richard Gere's asset stripping VC in Pretty Woman) is sure to be one question that comes up, although Boyd was quick to defend private equity's track record of building value into the businesses they take on.
"It's hard to see Apiary Capital as ‘just cutting costs and jobs' when in every business we've backed, headcount has increased over our investment period," she said.
Held in Manchester on 26 June, CRN's MSP North conference is designed to demonstrate how MSPs can add value in a highly competitive market. The full agenda can be viewed here.
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