Drawing on the thinking of Bain Consulting’s Chris Zook—whose “Profit from the Core” philosophy underscores focus, differentiation, and repeatable models—I see Managed Service Providers (MSPs) at a strategic inflection point. The lower middle market (LMM) M&A landscape is undergoing rapid transformation, driven by generational ownership transitions, private equity’s capital abundance and hunger for recurring revenue, and a surge in demand for managed IT services. MSPs are in high demand as businesses increasingly seek scalable, cost-effective solutions to handle a slew of various complex IT, cybersecurity, device, asset and spend management, and digital infrastructure—without the burden of developing those capabilities internally.
Drawing on Falcon Capital Partners’ field-tested framework for scaling tech services firms, and strategic insights from leading M&A playbooks, this article outlines a disciplined, four-phase model for MSP owners – any management team – aiming to position their firms for a premium exit.
Whether your exit horizon is six months or three years, this roadmap is designed to help you scale with intention, reduce buyer risk, and capture a valuation multiple that reflects the true value of your business.
The Strategic Context: MSPs Take Center Stage in 2025–2026 LMM M&A
The MSP sector has become a magnet for M&A activity thanks to its predictable cash flows, scalability, and mission-critical service offerings. PE giants like Thoma Bravo, Vista Equity, and Insight Partners have poured billions into platforms such as SolarWinds, Datto, and Kaseya. PwC’s 2025 M&A Outlook identifies especially cybersecurity—as a top consolidation target, with ransomware and integrated IT needs driving urgency. Deloitte echoes this, citing digital transformation and AI adoption as accelerants of tech M&A.
Despite cautious optimism in the LMM due to high interest rates, geopolitical risks and selective buyers, the market remains vibrant—especially for MSPs positioned as platforms. Falcon Capital warns, however, that nearly 80% of tech services firms fall into what is know as Despite headwinds from high interest rates, geopolitical uncertainty, and increasingly selective buyers, the lower middle market remains active—particularly for MSPs positioned as true platforms. Yet, Falcon Capital cautions that nearly 80% of tech services firms fall into the so-called “lifestyle trap”: founder-led businesses with thin capital, underdeveloped back-office systems, and accounting practices too weak to sustain a scalable revenue model.
Whether it’s Chris Zook or another strategist, the message is the same: companies that optimize operations and sharpen their focus on core strengths are the ones that thrive. For managed service providers, the firms best positioned for premium exits are those that double down on their unique value—whether that’s regional dominance, vertical specialization, or superior sales and management execution—while professionalizing operations and building a repeatable growth engine.
Here is a straightforward way to professionalize your operations and put the it on a growth trajectory. It’s built on one premise: One doesn’t find or fall into great exits—you have to build them by embedding strategy into every stage of growth and executing that plan with discipline.
The first step is clarity. Align your leadership on a 12-36 month roadmap targeting Managed Recurring Revenue (MRR) growth, customer stickiness, and service-line expansion.
Next, position your firm as a differentiated, low-risk acquisition.
Demonstrating scalability—without sacrificing control—is where many MSPs stumble. Don’t.
This is where the stakes are highest—and where going it alone is a very costly mistake. Buyers hold all the advantages: bigger teams, deeper resources, endless reps in M&A. Sellers, by contrast, carry all the risk. Trying to sell your business without a banker and a seasoned deal team is like performing surgery on yourself—painful, messy, and likely fatal to value.
Financial transparency is more than hygiene—it’s a valuation lever. Falcon, PwC, and Deloitte all agree: clear books, adjusted EBITDA, and segment-level profitability win buyer trust.
MSPs continue to rank among the most sought-after consolidation plays. But for every strong exit, there are sellers who sabotage value through avoidable mistakes:
As Zook’s research consistently shows, the most successful exits aren’t opportunistic—they’re intentional. By focusing on your differentiated core, implementing repeatable processes enabled by documented systems, and aligning with a team of advisors, MSP owners can command premium multiples in a competitive market.
Start your readiness journey today. Conduct a preliminary assessment, speak with advisors like Falcon Capital.
What’s your biggest obstacle to exit-readiness? Drop a comment or reach out—I’d love to hear your story.