Riding the wave of MSP M&A
M&A activity is booming in the channel. Alistair Forbes, managing director of SolarWinds MSP, explains how MSPs can cash in
Whether it's a union, a tie-up, takeover or consolidation, it's clear to see that over the last few years there has been a significant amount of M&A activity within the IT channel, particularly among MSPs. With several companies even hitting double figures in completed acquisitions for the last 12 months, there is little indication of this trend slowing down anytime soon.
These are exciting times in an MSP's lifecycle. While a merger or acquisition will bring new opportunities, it also brings a number of challenges to the new larger business, whether that is entry into new markets, consolidation of resources, or integration of processes and personnel. All this takes place against a backdrop of fighting to maintain relevance in their target markets, pursuing growth plans and turning the acquisitions into competitive advantages and not letting them become albatrosses.
So how can an MSP integrate the two new sides of the business without compromising on service delivery? How does an MSP manoeuvre itself successfully through such a dramatic re-invention?
Gaining scale and fuelling growth
The underlying objective of a merger or acquisition is growth. Whether this is by gaining more traction in the domestic market, entering a new market to generate new revenue streams, or expanding its geographic footprint, together, the new bigger and better MSP will have an aim for growth. And the merger or acquisition will enable an MSP to grow faster than if it did this organically.
But it is not as simple as simply combining lists and marketing resources.
The two companies will need to reach alignment quickly around short-, medium- and long-term growth goals, or there is a risk that opportunities and market confidence will rapidly disappear.
MSPs that find alignment with their new partners will not only be able to pursue common or new markets, create product development plans and new approaches to reaching customers - they may be able to create new opportunities that may not have previously existed or been open to them. In many instances, this alignment will have been discovered or at least begun in the original discussions, but for an MSP to thrive during this potentially tricky time, clear united goals around a single strategy are a must.
The technology evolution
While scale and growth are factors to consider during M&A, the effect a merger or acquisition has on an MSP's product portfolio must be examined closely. The most important audience during an acquisition is the customers and, for MSPs, the majority of questions that will come from them will centre on continuation of service, fees and opportunity.
The first two of these topics come from a distrust of change. The latter, however, presents the potential to win over previously sceptical customers. Many MSP mergers result in a product and service portfolio that is greater than the sum of its parts. This may entail adding functionality such as hosting in the cloud, or on-premise, or both, or being able to offer a broader service and take on new technology innovations such as analytics, machine learning and data-driven automation. A merger or acquisition between two complementary MSPs will allow a business to deliver a stronger and more complete portfolio of capabilities, as well as serve more customers in more innovative ways. Not so much ‘business as usual' - more ‘business plus'.
Yet bringing two technologies together can bring some challenges. In order to ensure that MSPs are meeting the needs of their customers as well as maximising the potential of added innovation, the senior team must devise and agree a comprehensive product roadmap and combined product strategy in order to ensure success.
Putting people first
A merger or acquisition will bring new people, new skill sets, as well as expert knowledge and experience to the new entity. But similar to the technology evolution, duplication is unavoidable. Yet your employees are an undeniably key asset to a company during this turbulent time. Not only do they maintain customer relationships, but it is people within your company that will have a deep understanding of the market, as well as vision for the company and industry.
Just as with your product offering, it is crucial to assess your business and customer needs. Who do you need to deliver on the new strategy, build the value of the new company, while maintaining a superior customer experience?
Thriving in a time of change
The MSP world is changing rapidly, and the rise of M&A activity and the innovation it brings will only accelerate the evolution. Mergers and acquisitions are enabling MSPs to grow faster, add new functionality and have a stronger position in the market. And while there are many factors to consider in order to thrive during this time, ultimately, success comes down to doing what is best for your business, your employees, and most importantly, your customers.
Alistair Forbes, managing director of SolarWinds MSP (general manager at LOGICnow)