The IT industry is consolidating at an rapid pace right, especially in the Managed Service Provider (MSP) space. As a buyer we focus on acquisitions that will allow us to provide an enhanced level of services to the Clients and opportunities to the team members we bring on. If you find yourself the Client of a buy-side MSP you should benefit from their increasing scale and maturity, enjoy the ride!
The reality is that most MSPs are on the sell side, especially those that are still owner led with less than 10 employees. Selling is a great opportunity for those owners to benefit from all their hard work and move on to something else. As a Client of one of these groups you want to ensure YOUR business also benefits from the sale. Here are three areas to look for when your provider has been sold.
The buyer is not in the IT industry already
If your IT provider is smaller and sells to a larger, more mature IT group, hang in there and see how it goes. Typically the larger group will provide BETTER service and results after a short transition period (no more than a few months). When we perform acquisitions the Clients are always surprised at the increased level of service and support after we get them onboarded to our “way” of doing things.
If the buyer is a financial buyer or Private Equity group with no industry experience, be cautious. These buyers typically are looking to sell the business again in the next 3 years and make a profit on it. Their focus is on increasing revenue which makes investments in improving services and innovation stop. Service levels start to decline, pricing increases, and the overall relationship becomes more transactional.
No one sticks around
Not everyone from your current provider will transition to the new company, but someone should! Most owners stick around based on their level of involvement with service delivery. Owners you were calling on their cell phones will still be on the team, but be prepared to be redirected to the Service Desk over time. Those you rarely interacted with will be gone within a couple of months.
Some (not all) of the technical folks will stay on with one caveat. Often there is the one “favorite” tech that does not move forward with the new group and the Client panics. The reason this happens is that larger providers are PROCESS, not people based, and then the “favorite” tech cannot save everyone with their cape, they leave. Don’t panic, let the new provider show you that the process-based approach will deliver better results.
The rollup has become a pile up
Even buyers in the technology industry can get ahead of themselves. This happens when acquisitions start stacking up and turn into a pile up. If the buyer was ALSO recently purchased you are now 3 deep on the depth chart from the actual owner. Initially everything is business as usual, but soon no one is in charge of your account, staff turnover starts increasing, and service levels start dropping. This is very typical in PE-backed rollups. Not much you can do here but start looking for a new provider.
Acquisitions are an ongoing part of the business cycle. When your IT provider sells it is likely a sign that they could no longer grow or innovate the business OR that they have built a solid business that will continue serving you well long into the future. The key is to watch out for the signs above to ensure YOUR business is served best after the transaction!