M&A investment in the MSP Space – Treasure or Trouble?

There is a lot of fantastic M&A activity of Managed Services Providers (MSP’s) happening in the market today.  If that’s you, you’ve done a great job identifying a viable acquisition, you’ve done months of due diligence, negotiated win/win pricing, you feel you have the right leaders in place, and you have made the announcement to the new staff and customers assuring everyone that only positive changes will come from this acquisition.  Everyone is excited and there is great energy around the new opportunity! Truth be told, the investment results are not always as profitable as planned.

Here are 3 key tips to protecting your investment and getting the results you and your investors are expecting.

  1. Invest in the integration process. Cash may be king during the negotiations, but flawless execution is king during the integration.  Protect your investment by having dedicated resources to plan, communicate and help execute on the integration. 

Tasking your leaders with the planning, change management and execution of the transition process can cause competing priorities and a breakdown in service delivery and sales. This is where firms start to see costly attrition and lost opportunities.  What is expected to be a 6-month integration process often slips to a year or more, further reducing your ROI.  To protect your investment, consider bringing in dedicated resources to focus on the integration.  Don’t wait until the domino effect starts to address the issues.  The investment will be well worth it!

  1. Have a comprehensive plan for each product and service currently being provided by your new acquisition.

A consistent set of products and services is key to profitability, but integration from currently contracted services needs to be addressed quickly and efficiently.  This requires a comprehensive understanding of everything currently being sold or supported, focused decision making on all current product and service offerings, planning, training, written communication, problem resolution processes and how to proactively deal with exceptions. Assuming everything will fit nicely into your current service bundle can cause confusion and frustration and risk costly mistakes.

  1. Have a detailed org chart and runbook. Don’t stop at the initial introductions of your leadership team and their areas of responsibility.  That’s a great start to build confidence but the new staff will have many process and procedure questions that need to be addressed quickly and efficiently.

The new staff will need to understand in detail who to go to for specific services, how to engage them, what collateral is available for clients, who from each group is going to be client facing, and who and how to engage promptly as issues arise.  A thorough longer-term implementation plan will help protect your valuable assets from unexpected attrition.

The MSP space is complex. Acquiring vs growing organically adds to the complexity because you now need a new level of process maturity that goes beyond the initial integration plan and takes current commitments and cultural fit of customers and employees into consideration.  Having a dedicated resource will streamline the process and help protect your valuable investment.

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