2024 MSP 501 Winners Hunting for M&A Targets

Mergers have become a viable way for managed service providers to grow, and the 2024 MSP 501 winners expect the merger and acquisition pace to increase this year.

The surveys for the 2024 MSP 501 applications showed 24% of this year’s winners made at least one acquisition or merged over the past two years, while 40% expect to do so this year. Only 2% of the 2024 MSP 501 said they plan to sell. That means the buyers will have to look for other – probably smaller – MSPs to buy or the potential buyers will face bidding wars for the few looking to sell.

MSP acquisitions include blockbusters such as Insight Enterprises' $410 million acquisition of SADA in 2023, but most are smaller deals set to increase market share in a geographical area or add a specific service.

We spoke with a few MSP 501 winners about their M&A strategies.

New Charter Technologies

New Charter is a frequent acquirer, with 26 acquisitions since it began in 2019. New Charter has successfully brought newcomers on board, allowing them to continue to thrive. Not only did the company stay on the MSP 501 this year, but a bunch of its acquisition targets still doing business under their original brand also made it. They include Apex Technology Management, ActiveCo, DCG Technical Solutions, CTSI, Complete Technology Solutions, Braver Technology Solutions, Olmec Systems, Greystone Technology, The Tech Group, Adnet Technologies and Strategic Solutions.

“We’re not a holding company,” New Charter CEO Peter Melby said. “We’re a strategic IT platform that’s focused on building the best provider in the market. We don’t just slap everything together and slap a new name on it. We build quality.”

New Charter's Peter Melby

The acquisitions have grown New Charter’s headcount to over 1,000, but Melby points out most of the leadership of its targets have stayed with New Charter.

“We integrate for value, not vanity,” he said. “We look at what we are going to bring together. Where is the value for the customer? Where is the value for the employees? If we create value for the customer and employees, it ultimately leads to value for the shareholders.”

New Charter is clearly among the 40% of the MSP 501 that said it wants to make acquisitions this year.

“Looking to continue double-digit growth and preserve bottom line health as well,” Melby said of New Charter's goals for the rest of the year.

Insight Enterprises

Since last August, Insight Enterprises has acquired app dev firm Amdaris, Google Cloud specialist SADA and pure-play ServiceNow elite partner Infocenter.

“The SADA acquisition is key for us this year,” said Stephen Moss, Insight’s SVP of managed services. “We’re really becoming a hybrid-comma-multicloud player. InfoCenter is a pure-play ServiceNow company, and we think that's an incredibly important component to our managed strategy. It’s going to help us accelerate where clients have needs on the edge and they have their own ServiceNow instance. We're going to continue to do an integration between ServiceNow to us, and so we think the network effect is going to be strong enough. We’re not asking them to replace all their tooling. We’ll adopt what they do.”

The acquisitions swelled Insight’s headcount by more than 2,000 people, to over 16,000. The Infocenter and SADA deals also included development centers in India.

“Strategically, SADA is about getting GCP into the stack. With InfoCenter, it’s about expanding and building ServiceNow into evertyhig we do,” Moss said.

Jolera

Jolera made the MSP 501 for the first time this year. It acquired Portugal-based IT Center in April, to give Toronto-based Jolera a broader enterprise skill set and greater reach in Europe. The ITCenter deal came too late to impact Jolera’s standing on the 2024 MSP 501 list but it added 200 employees to bring Jolera’s total to 550. Jolera CEO Alex Shan forecasts that Jolera will see a 20-25% increase in monthly recurring revenues from the IT Center deal.

“We decided to grow our business in Europe, which is really interesting, because I learned that while managed services are standard here in North America, they’re still sort of knew over there,” he said. “So it led to great growth opportunities.”

This was only Jolera’s second acquisition over its 25 year-history, and Shan said he will only do more if they make strategic sense.

“For us, acquisitions are really about a good fit,” he said. “Can we use this acquisition to leverage their resources and their tech within our existing customer base? Do they bring more customer share or do they bring IP that adds to the IP we built? We look at these acquisitions very strategically. This is not an easy decision. We're not an acquisition hunt, but we're certainly not turning down opportunities that make sense.”

Omega Systems

Omega Systems has made four acquisitions since receiving investment from private equity firm Pfingsten Partners in 2021. Omega CEO Mike Fuhrman said he wants to build the Reading, Pennsylvania-based company into a super regional MSP. But the first thing he looks at when considering an acquisition is culture.

“Culture is always the No. 1 thing, for sure,” he said. “If you mess that up and bring in the wrong group of people that don’t’ fit the culture, a lot of bad things happen. We make sure that we spent a lot of time during due diligence getting to know the team. We have very passionate people caring about producing the best outcomes for customers and working well together, and bringing everything they have every day to the office. And if we screw that up with a mistake on an acquired asset, we tend to take down the entire business.

C1

How many acquisitions are too many? That’s what some in the industry wondered after C1 declared bankruptcy early this year, after a spree of acquisitions in recent years left it highly leveraged. But C1 has completed its restructuring and CEO Jeffrey Russell said it is ready to put its acquired technologies to good use.

C1's Jeffrey Russell

“We are now better positioned to deliver innovative products and services to partner with and enable organizations to take full advantage of technology that powers elevated connected human experiences,” said Russell, whose company has made 20 acquisitions. “As we look to the future, we are excited to bring more innovations based on generative AI, such as our Intelligent Virtual Assistant C1 Elly, advanced observability across the network for greater resilience, and expanded security capabilities to address new threats created by generative AI.  With our strong leadership team in place to support our customers and partners, the C1 team will focus on strengthening those valued relationships, and we look forward to supporting more businesses and organizations with world-class solutions.”