Editor’s note: The following is a guest post by Cristian Anastasiu, founder and a managing partner at M&A advisory firm Excendio Advisors.
Most MPS owners sell when the right strategic moment arrives, not because they’ve reached a predetermined date. A buyer approaches with an attractive offer, market conditions change, a personal inflection point arrives or an owner realizes that the company may grow faster with a larger partner. The difficulty is that the opportunity often arrives before the owner is prepared.
Preparation matters. A founder may not be ready to sell today, but the business should be able to withstand buyer scrutiny when the moment comes. Preparation is not a commitment to sell. It is a way to preserve the option to sell on favorable terms.
My firm recently surveyed founders of IT services, software and technology-enabled businesses who sold their companies in the last 23 years. Rather than asking buyers and advisors what sellers should do, we asked people who lived through the process. The questions covered timing, preparation, buyer selection, culture, valuation, transaction terms, due diligence, employee and customer communications, professional advisors and what respondents would do differently.
The research was designed to capture experience-based observations, including personal and emotional dimensions. It was not intended as a statistically representative study of every IT transaction. Its value rests in recurring patterns you see among owners making a consequential decision, frequently for the first and only time.
Those experiences should be viewed against a maturing IT services M&A market. Fifteen years ago, many MSP transactions were local or strategic combinations, and buyers often relied heavily on revenue, EBITDA and customer relationships. Today, private equity-backed platforms, sophisticated strategic acquirers and professional lenders have institutionalized the process. Quality-of-earnings reviews are common. Data requests are deeper. Buyers analyze revenue at the customer, contract and service-line level. They also distinguish among managed services, cloud resale, project revenue, hardware and other lower-margin or less predictable sources of revenue.
Readiness assessments
The best time to resolve an issue is before a buyer discovers it.
Early preparation removes avoidable diligence risks and strengthens the financial narrative. Our research found that early preparation can remove diligence risks, strengthen the financial narrative and increase valuation by 10% to 30%, depending on the company and the issues that can realistically be corrected. That is not a guaranteed uplift. It reflects the potential effect of better earnings support, stronger positioning, improved buyer competition and fewer reasons for a buyer to reduce price or demand protective terms.
Early preparation normally begins 12 to 24 months before a transaction. A readiness assessment should review financial statements and key performance indicators, reconcile reported results to management reporting, analyze revenue and gross margin by customer and service line, identify defensible EBITDA adjustments and test whether forecasts are supported by pipeline, staffing capacity and historical performance.
An assessment should expose risks that buyers will notice. These include customer concentration, weak contracts, inconsistent revenue classification, owner dependence, limited management depth, undocumented intellectual property, cybersecurity or compliance gaps and unresolved tax or legal matters. Some issues can be fixed. Others can be explained, quantified and incorporated into the company’s positioning before they become surprises during exclusivity, when the seller’s leverage is lower.
Preparation also means deciding what is being sold and what the owner wants from the transaction. Is the priority maximum cash at closing, a strategic partner, continued employment, rollover equity, employee continuity or a particular legacy? A high headline valuation can be less attractive once earnouts, working-capital requirements, escrow, indemnification, rollover risk and employment terms are considered. Owners who define their objectives early can compare buyers on the entire package, not merely the initial multiple.
The current market
What are buyers looking for now? Recurring revenue remains important, but the label alone is no longer enough. Buyers want to understand the quality beneath it: contract length, renewal mechanics, churn, customer tenure, pricing power, gross margin, service delivery requirements and whether revenue depends on the founder. They examine concentration not only by customer, but also by vendor, technology, geography and vertical market. They look for a capable leadership team, repeatable sales motion, disciplined reporting and a credible path to growth after the transaction.
This can surprise founders who remember when being an MSP was itself a differentiator. Today, buyers separate high-quality managed services from recurring product or cloud resale. They also ask whether automation and AI will improve margins or commoditize the offering. A company with less recurring revenue but better retention, margins, data and expertise may be more compelling than one with a higher percentage that cannot withstand scrutiny.
The practical conclusion is simple: owners should begin preparing before they feel they have to sell. The objective is not to predict the exact month when the market will peak. It is to build a company whose performance can be demonstrated, whose risks are understood and whose story is credible to the right buyers. When the strategic moment arrives, readiness gives the founder choices. In M&A, choices create leverage — and leverage helps protect both value and the owner’s broader objectives.
