ExitCon 2024 4th Session – Post Close Success

The 4th session of ExitCon 2024 hosted by Devin Rose, with Guest Speakers:

ExitCon is an online event designed to provide MSP Owners with the knowledge and tools they need to plan a successful exit strategy. This conference features industry experts who will share their insights and experiences on navigating the complexities of selling an MSP.

The session focuses on strategies for achieving post-close success in MSP acquisitions, emphasizing employee retention, cultural integration, and maintaining customer relationships. Key points include the importance of clear communication, addressing employee concerns proactively, and aligning technology stacks to support long-term growth and integration.

Got more questions? Contact us now!

ExitCon 2024 3rd Session – Valuations

The 3rd session of ExitCon 2024 hosted by Hartland Ross, with Guest Speakers:

ExitCon is an online event designed to provide MSP Owners with the knowledge and tools they need to plan a successful exit strategy. This conference features industry experts who will share their insights and experiences on navigating the complexities of selling an MSP.

The discussion revolves around the valuation and market dynamics of MSP businesses, highlighting factors such as market consolidation, valuation metrics beyond EBITDA, and the importance of clear financial transparency and standardized accounting practices to attract potential buyers and optimize business operations. Key insights include the impact of acquisition trends and the necessity of preparing comprehensive financial documentation for effective decision-making and successful transactions.

Got more questions? Contact us now!

ExitCon 2024 2nd Session – Preparing an MSP for Sale

The 2nd session of ExitCon 2024 hosted by Hartland Ross, with Guest Speakers:

ExitCon is an online event designed to provide MSP Owners with the knowledge and tools they need to plan a successful exit strategy. This conference features industry experts who will share their insights and experiences on navigating the complexities of selling an MSP.

The discussion focuses on preparing an MSP for sale, emphasizing the importance of having long-term, stable client contracts and implementing best practices to maximize the business’s value. Key reasons for selling include focusing on another business, retirement, and burnout, while challenges such as ensuring cultural fit and maintaining transparent financials are highlighted. Proper due diligence and understanding the buyer’s strategy are crucial for a successful sale.

Got more questions? Contact us now!

ExitCon 2024 1st Session – Deal Process

The 1st session of ExitCon 2024, hosted by Hartland Ross.

ExitCon is an online event designed to provide MSP Owners with the knowledge and tools they need to plan a successful exit strategy. This conference features industry experts who will share their insights and experiences on navigating the complexities of selling an MSP.

The session discusses key considerations for MSP owners contemplating a sale, including reasons for selling, such as retirement and burnout, as well as the impact of COVID-19. It highlights the importance of setting expectations, understanding valuation, managing customer concentration, and documenting revenue trends. Additionally, the role of intermediaries in facilitating better buyer-seller matches and smoother transitions is emphasized.

Got more questions? Contact us now!

Webinar: How data drives valuations higher – with special guest Larry Cobrin

Unlock the secrets to driving valuations higher through the power of data in our recorded webinar, “How Data Drives Valuations Higher,” featuring the expertise of special guest Larry Cobrin from MSPCFO.

In this insightful session, Larry Cobrin, a seasoned industry expert, delves deep into the crucial role data plays in enhancing business valuations. Whether you’re a business owner, investor, or data enthusiast, this recording offers a wealth of knowledge to help you harness the full potential of data for elevating valuations. Watch it here.

If you enjoy this video, you might also want to check our previous interview with Dave Sobel where we discussed trends in managed services. Watch it here!

The Host Broker offers a free evaluation for owners of IT services businesses considering exiting. Learn about the acquisition process and find out what your company may be worth on the market.

If you have any questions, please don’t hesitate to contact us.

Selling Your MSP: By the Numbers

When you sell your MSP with The Host Broker, our processes assure that your business is going to receive enough interest from potential buyers to return fair market value (or greater). In today’s blog, we’ll demonstrate by looking at milestones in the selling process from a numbers perspective.

Thousands of Potential Buyers

For our new listings, we create a one-paragraph summary of the business which acts as a teaser for interested buyers. It identifies the nature of the business, the geographical scope, some high-level financial metrics, the seller’s reason for exiting, and anything else that is unique about the business. We distribute this blurb across multiple channels:

  • We send it to a few thousand subscribers via our weekly mailing list, of which 25% to 35% open it each week.
  • We list it on our website, where >100 buyers login to review listings each week.
  • We post new opportunities to Reddit, where hundreds of Redditors view our posts.
  • We list via online brokerage platforms, where hundreds view each listing.
  • We share listings with partner brokers, whose own audiences number in the thousands.
  • We have an “MSP Wishlist” where buyers indicate the profile of MSPs they are interested in. For each new listing, we review the MSP Wishlist and all matches are reached out to. There are typically 10-30 matches or more for each listing.

While it is difficult to come up with a precise tally, when you add up the estimates for each channel, it is safe to say the number of potential buyers reached when you list with The Host Broker is in the 1000’s.

Dozens of NDAs

When a buyer is interested in receiving more information about a listing, their next step is to request and sign a non-disclosure agreement. Once signed, we then send them a package containing more information about your business including a Company Overview document, balance sheets, and profit & loss statements.

For a typical MSP listing, we’ll have several dozen potential buyers who sign the seller’s NDA.

Many Discovery Calls

After a buyer has reviewed the package, if they are interested in moving forward, the next step is usually to arrange a discovery call with the seller. Sometimes, a buyer may have questions they’d like answered prior to having a call. In any event, the call gives both parties an opportunity to become acquainted and to ask each other questions about operations, key clients, employees, company culture, or anything else that is important to them.

Ultimately, most MSP listings result in 10-15 phone calls between interested buyers and the seller although this can be increased or decreased based on how rigorous the qualification process is.

Several Offers Submitted

After a call with the seller, the buyer will decide whether or not to put forward an offer. Often this will take the form of a Letter of Intent. An LOI is a non-binding agreement which establishes expectations for the key deal terms such as the valuation, payment terms, exclusivity, non-compete clause, access level to materials during due diligence, what is being purchased and more. The LOI typically has an expiration date. Some buyers will instead put forward an informal offer detailing the valuation and payment terms, then will graduate to a formal LOI upon request from the seller.

Most owners of MSPs who list with The Host Broker end up with 3-6 LOIs to choose from, again depending on how stringent the qualification process is.

One LOI Signed

By going through the selling process, sellers end up with several competing LOIs to choose from and can be confident they are being offered a fair price for their business. But price isn’t the only consideration. Sellers also consider which LOIs have the most favorable payment terms, their rapport with the buyer, whether the non-compete clauses align with their future plans, whether their employees/clients will be well-served by the potential buyers, and more.

Factoring all that in, the seller chooses one LOI to sign, and proceeds to the due diligence period.

Few Months of Due Diligence

During the due diligence phase, the chosen buyer gains access to and reviews key documents including financials to verify their accuracy. Legal and operational reviews are conducted. If needed, this is also when the buyer may secure financing, and their bank may have additional requests for documentation. Negotiations and adjustments rarely, but sometimes may occur based on the findings.

This phase is a thorough examination of the business working towards finalizing a purchase agreement and may take 2-4 months.

Several Weeks to Finalize a Purchase Agreement

Once due diligence is complete and both parties are satisfied, their attorneys take over to negotiate the purchase agreement. It usually requires multiple rounds of iterations to align the purchase agreement with the buyer and seller’s intent and to ensure legal compliance.

Finalizing the purchase agreement typically takes several weeks, but once agreed to, is signed, and the acquisition is official!

One Last Thought

Selling your MSP with The Host Broker guarantees exposure to thousands of potential buyers through various channels, results in multiple competitive offers, and culminates in one purchase agreement that is satisfactory for both parties. Contact The Host Broker to explore whether selling your MSP is a good fit for you.

How to Avoid Selling Your MSP for Only $14,000

In this podcast episode, Joe, Jeff, and Hartland Ross discuss the importance of having an exit strategy and processes in place for MSPs to avoid burnout and increase the value of their business. He also highlights the benefits of acquiring and growing a book of business and advises sellers to understand the limitations of their business and what it is worth. The conversation also touches on the emotional process of selling a business, and how one may want to consider what they plan to do once the business is sold.