The Impact Of M&A On The MSP Market

By Arlin Sorensen, O and Founder of the Heartland Companies which includes HTG Peer Groups

It’s all the rage right now. Everyone seems to be a buyer or seller; some are even trying to play both sides of the M&A puzzle. It is hard to find anyone who is not actively considering M&A as a strategy for growth or exit. And while it may be exciting and the seemingly best option for growing or transition, it also comes with some baggage that can become detrimental if not managed well.

One of the biggest deterrents to the M&A craze is the distraction that accompanies it. There is a tendency for owners to become obsessed with the potential to do a transaction, whether pursuing the buy side or the sell side, and they lose focus on running their business. If they don’t control the information flow, not only will they become distracted but often the entire team can lose momentum in anticipation of a coming change. That creates chaos and even worse, can limit or at least slow sales to the point that profitability can be diminished and valuation damage can occur.

If I learned anything in my ten M&A transactions while running my MSP business, it was the need to closely control the timing of when communication happened.  Over a ten year period we were involved in 10 buy/merge side events and one exit event. I still recall our first where we communicated early and often what we expected would happen months before we got to the closing date. Business almost stopped as speculation began on what would happen with our structure, who our new teammates would be, and the myriad of things that people dream up when there is a lack of clarity and information.