Mergers and acquisitions are becoming increasingly common in the MSP space for various reasons. One is to help address the labor shortage. According to Kaseya’s 2022 MSP Global Benchmark Survey, hiring staff and acquiring customers are two of the biggest challenges MSPs face today. Believe it or not, both of these issues can be solved through acquisitions.
For instance, “acqui-hiring” is when a business completes an acquisition with the intent to grow its employee base, a successful strategy to build out teams with qualified and experienced individuals. In today’s competitive labor market, where talent is scarce, “acqui-hiring” is a huge benefit of M&A. On the customer acquisition front, an acquisition can result in a large number of customers being onboarded into an MSP’s systems.
Clearly, a well-executed acquisition can help an organization reach new heights, but it doesn’t happen overnight. Whether buying or selling, here are some steps to prepare for a successful M&A transaction.
1. Analyze the market
One of the very first things an MSP should do is assess the market and its customers’ needs to find an acquisition with the best fit. Consider how the two companies will mesh on both a technical and go-to-market perspective before starting the process. To determine this, ask questions like:
- Do customers need the technology this company provides?
- Does the technology complement the existing profile and strategy?
- What will the go-to-market strategy look like?
Knowing the answers to these questions in advance can help inform big decisions around selling or buying a company.
2. Beware of time destroying a deal
Once the acquisition process begins, it’s important to work quickly so time doesn’t prevent the deal from going through. Too much time allows for uncertainty to set in on both sides, putting even the best proposals at risk of failing. Buyers may get cold feet as the reality of what things will look like after the acquisition sets in, and sellers may become disillusioned and not want to give up the company they painstakingly built. Additionally, external market changes can quickly influence the deal, causing one or both parties to withdraw. By making sure the acquisition process moves swiftly, these major pitfalls can be avoided.
3. Keep the “secret sauce”
Every MSP has something that makes them special, whether it’s a unique selling strategy or a superb support team. Let’s call this the “secret sauce,” and it might just be the reason customers are working with you and not another MSP. To retain as many customers as possible during an acquisition, protect this “secret sauce.”
4. Bring in outside resources and experts
Every year when tax season starts, many of us quickly realize we are not tax professionals – and during an acquisition is not the time to suddenly become one. MSPs should work with experts on areas of the acquisition process they aren’t as well-versed in to ensure all concerns are properly addressed. If taxes aren’t your strong suit, bring in an accountant. Worried about cybersecurity issues? Add the CISO to the conversation. These experts can better inform the deal and help you anticipate and work through any drawbacks that may arise during the acquisition process.
5. Don’t overlook the little things
Back-office and outsourced activities like banking and human resources may be far from the top of the list when completing an acquisition, but waiting to look at them until the deal is complete can cause delays in onboarding. The quicker you address these activities, the sooner they can be offloaded from the acquired company. Also, any contracts with outsourced service providers can help calculate timelines for transitioning data into the new system.
Using a documentation platform to automate data transfer can help ensure a seamless transition. Not only that, but well-kept documentation can support the onboarding process for employees coming over in an acquisition and help minimize the learning curve.
An acquisition can start an exciting new chapter for any company, but only if it’s done right. Following these tips can improve the likelihood an acquisition will run smoothly and be mutually beneficial for the businesses involved, their customers, and their employees.
KATHY WAGNER leads all finance, human resources, and legal activities across the full portfolio of Kaseya companies. She possesses a deep understanding of the role of finance in business and has acted as a key adviser on more than 50 acquisition and integration efforts, providing guidance during negotiations.
