Month: March 2026

The UK’s IT Managed Services Market : A Brief Overview

In 2026, the UK’s IT managed services market is one of the most strategically important segments of the
country’s digital economy. With over 12,000 managed service providers operating nationwide, the market
has matured into a complex ecosystem shaped by shifting technology demands, rising cyber threats and
an increasingly regulated business environment. Despite being an established market, it continues to
grow significantly, with analysts predicting sustained expansion as organisations increasingly rely on
external partners to manage their technology estates. According to a UK government research report,
there were over 12,800 active managed service providers (MSPs) operating across the UK in 2025. The
same report estimates the annual revenue of the sector to be roughly £51 billion, with micro-firms making up 59% of the market. Although they only make up 4% (512 MSPs) of the market, larger firms are taking the most revenue, with their scale and diversified offerings providing a competitive advantage.

In recent years, the UK’s IT managed services market has become one of the most influential forces
shaping how organisations operate in an increasingly digital economy, At its core, the term “managed
services” refers to the ongoing outsourcing of IT operations to an external provider, or MSP, that assumes
responsibility for maintaining and optimizing an organisation’s technology environment under a
contractual agreement. Unlike traditional project-based IT support, managed services are continuous and
outcome-oriented as the MSP becomes an extension of the clients own IT function, taking ownership of
critical systems ranging from networks and cloud platforms to cybersecurity operations. As we enter 2026,
the IT managed services market continues to play a central role in the UK’s digital infrastructure,
underpinning the day-to-day operations of businesses, government bodies and public services.

The sustained growth of the UK’s IT managed services market is being fuelled by pressures such as
cybersecurity. As technology continues to develop, the escalation of threats such as AI-enabled intrusion
techniques, has pushed organisations of all sizes to implement protection software that can be built inhouse. Since 2020, technology-based managed security services, often delivered through dedicated
security operations centres, now represent the fastest growing sub-sector of the market. Hybrid working
models are becoming increasingly popular, combining remote and on-site labour. This has resulted in a
demand for scalable IT solutions that improve end-user experiences and ensure smooth IT support for
remote workers. Cloud computing is the second major force reshaping the market’s landscape as most UK organisations now operate hybrid or multi-cloud environments that combine legacy systems with public cloud platforms. This complexity has outpaced internal IT teams, creating demand for external partners to manage cloud operations as well as control costs, support migrations and curate a coherent and secure technology environment.

Managed cloud services have become a key counterpart to digital transformation initiatives, especially as
organisations look for predictable operating expenses (OPEX) and professional oversight rather than large
capital investments or ad-hoc project spending.

Like many other UK markets, automation and AI are transforming the dynamics of the UK’s IT managed
services market, particularly the supply side. Modern MSPs increasingly rely on AI-driven monitoring,
automated diagnostics and predictive analytics to deliver faster resolutions and more stable systems at
scale. Such capabilities not only improve performance and reliability for clients, they also allow MSPs to
restructure their business models around measurable outcomes rather than manual labour and hourly
billing. However, the increased use of AI brings new challenges, for example governance issues and data
risks, which many MSPs are now under pressure to help organisations resolve. Despite these
developments in technology, the human side of the market remains just as important. The UK continues
to face a shortage of digital and cybersecurity talent, which has made it harder for organisations to recruit
the specialist skills they require. This shortage has made managed services vital as MSPs pool expertise
across many clients, giving organisations access to skills that would otherwise be scarce.

In the current market, large national and global providers dominate enterprise-level contracts, as they
offer comprehensive portfolios that span networking, cloud, applications and security. Mid-sized MSPs
differentiate themselves through specialisation such as cybersecurity, Microsoft ecosystems and
advanced cloud engineering. The large number of smaller providers continue to serve regional and SME
markets, however many of them are now facing pressure from consolidation as larger players continue to
acquire specialist capabilities and broaden their reach. Overall, the UK’s IT managed services market is
one defined by complexity, scale and strategic importance. Organisations no longer view MSPs as just
outsourced technicians, but as partners responsible for resilience, security and running critical operations
smoothly. For many organisations, managed services are now a foundational layer that enables
innovation, compliance and productivity in a rapidly changing landscape. […]

Estimated UK ITMS M&A by Sub-Sector (2020 – 2024)

Software-Specific IT MSPs & Recent Deal Activity

In 2025, MSPs collectively contributed tens of billions in revenue to the UK economy, representing a critical delivery layer for enterprise-grade security, cloud and digital transformation services, often centered around specific software, such as AWS, Google Cloud, alongside Microsoft technologies (e.g. Azure and Microsoft 365). The competitive dynamics of this sector have fuelled notable mergers and acquisitions, as companies and other investors seek scale, diversification and software expertise. As outlined before, in the last few years, PE specialist Evergreen has expanded its UK footprint by acquiring multiple independent MSPs, including ITBuilder, Certum and CIS LTd, under its arm Lyra Technology Group. Similarly, specialist channel player Advania UK’s acquisition of CCS Media reinforced the growing demand for capabilities across hardware, software and end-to-end technology solutions. At the larger end of the market, strategic combinations like the merger of Trustmarque Group and Ultima Business Solutions are creating “powerhouse” IT services organisations, with combined strengths in automation managed services and cloud optimisation. Major technology integrators are also making strategic plays. Telefónica Tech’s acquisition of Microsoft partner Incremental, significantly boosted its UK software services footprint.

Meanwhile, global MSP Presidio were able to strengthen its presence in UK markets by acquiring Ergo.

Beyond consolidation, smaller regional MSPs such as Flotek and Redsquid continue to pursue bolt-on
deals to broaden their service portfolios in cloud, scybersecurity and managed service support for SMEs
and public sector clients. These moves reflect intense M&A activity, driven by buyers seeking specialist
Microsoft software capabilities, broader cloud services portfolios and recurring revenue streams. […]

To receive a full copy of the white paper, please email Melissa Dainelli at [email protected].

The UK’s IT Managed Services Market : A Brief Overview

In 2026, the UK’s IT managed services market is one of the most strategically important segments of the
country’s digital economy. With over 12,000 managed service providers operating nationwide, the market
has matured into a complex ecosystem shaped by shifting technology demands, rising cyber threats and
an increasingly regulated business environment. Despite being an established market, it continues to
grow significantly, with analysts predicting sustained expansion as organisations increasingly rely on
external partners to manage their technology estates. According to a UK government research report,
there were over 12,800 active managed service providers (MSPs) operating across the UK in 2025. The
same report estimates the annual revenue of the sector to be roughly £51 billion, with micro-firms making up 59% of the market. Although they only make up 4% (512 MSPs) of the market, larger firms are taking the most revenue, with their scale and diversified offerings providing a competitive advantage.

In recent years, the UK’s IT managed services market has become one of the most influential forces
shaping how organisations operate in an increasingly digital economy, At its core, the term “managed
services” refers to the ongoing outsourcing of IT operations to an external provider, or MSP, that assumes
responsibility for maintaining and optimizing an organisation’s technology environment under a
contractual agreement. Unlike traditional project-based IT support, managed services are continuous and
outcome-oriented as the MSP becomes an extension of the clients own IT function, taking ownership of
critical systems ranging from networks and cloud platforms to cybersecurity operations. As we enter 2026,
the IT managed services market continues to play a central role in the UK’s digital infrastructure,
underpinning the day-to-day operations of businesses, government bodies and public services.

The sustained growth of the UK’s IT managed services market is being fuelled by pressures such as
cybersecurity. As technology continues to develop, the escalation of threats such as AI-enabled intrusion
techniques, has pushed organisations of all sizes to implement protection software that can be built inhouse. Since 2020, technology-based managed security services, often delivered through dedicated
security operations centres, now represent the fastest growing sub-sector of the market. Hybrid working
models are becoming increasingly popular, combining remote and on-site labour. This has resulted in a
demand for scalable IT solutions that improve end-user experiences and ensure smooth IT support for
remote workers. Cloud computing is the second major force reshaping the market’s landscape as most UK organisations now operate hybrid or multi-cloud environments that combine legacy systems with public cloud platforms. This complexity has outpaced internal IT teams, creating demand for external partners to manage cloud operations as well as control costs, support migrations and curate a coherent and secure technology environment.

Managed cloud services have become a key counterpart to digital transformation initiatives, especially as
organisations look for predictable operating expenses (OPEX) and professional oversight rather than large
capital investments or ad-hoc project spending.

Like many other UK markets, automation and AI are transforming the dynamics of the UK’s IT managed
services market, particularly the supply side. Modern MSPs increasingly rely on AI-driven monitoring,
automated diagnostics and predictive analytics to deliver faster resolutions and more stable systems at
scale. Such capabilities not only improve performance and reliability for clients, they also allow MSPs to
restructure their business models around measurable outcomes rather than manual labour and hourly
billing. However, the increased use of AI brings new challenges, for example governance issues and data
risks, which many MSPs are now under pressure to help organisations resolve. Despite these
developments in technology, the human side of the market remains just as important. The UK continues
to face a shortage of digital and cybersecurity talent, which has made it harder for organisations to recruit
the specialist skills they require. This shortage has made managed services vital as MSPs pool expertise
across many clients, giving organisations access to skills that would otherwise be scarce.

In the current market, large national and global providers dominate enterprise-level contracts, as they
offer comprehensive portfolios that span networking, cloud, applications and security. Mid-sized MSPs
differentiate themselves through specialisation such as cybersecurity, Microsoft ecosystems and
advanced cloud engineering. The large number of smaller providers continue to serve regional and SME
markets, however many of them are now facing pressure from consolidation as larger players continue to
acquire specialist capabilities and broaden their reach. Overall, the UK’s IT managed services market is
one defined by complexity, scale and strategic importance. Organisations no longer view MSPs as just
outsourced technicians, but as partners responsible for resilience, security and running critical operations
smoothly. For many organisations, managed services are now a foundational layer that enables
innovation, compliance and productivity in a rapidly changing landscape. […]

Estimated UK ITMS M&A by Sub-Sector (2020 – 2024)

Software-Specific IT MSPs & Recent Deal Activity

In 2025, MSPs collectively contributed tens of billions in revenue to the UK economy, representing a critical delivery layer for enterprise-grade security, cloud and digital transformation services, often centered around specific software, such as AWS, Google Cloud, alongside Microsoft technologies (e.g. Azure and Microsoft 365). The competitive dynamics of this sector have fuelled notable mergers and acquisitions, as companies and other investors seek scale, diversification and software expertise. As outlined before, in the last few years, PE specialist Evergreen has expanded its UK footprint by acquiring multiple independent MSPs, including ITBuilder, Certum and CIS LTd, under its arm Lyra Technology Group. Similarly, specialist channel player Advania UK’s acquisition of CCS Media reinforced the growing demand for capabilities across hardware, software and end-to-end technology solutions. At the larger end of the market, strategic combinations like the merger of Trustmarque Group and Ultima Business Solutions are creating “powerhouse” IT services organisations, with combined strengths in automation managed services and cloud optimisation. Major technology integrators are also making strategic plays. Telefónica Tech’s acquisition of Microsoft partner Incremental, significantly boosted its UK software services footprint.

Meanwhile, global MSP Presidio were able to strengthen its presence in UK markets by acquiring Ergo.

Beyond consolidation, smaller regional MSPs such as Flotek and Redsquid continue to pursue bolt-on
deals to broaden their service portfolios in cloud, scybersecurity and managed service support for SMEs
and public sector clients. These moves reflect intense M&A activity, driven by buyers seeking specialist
Microsoft software capabilities, broader cloud services portfolios and recurring revenue streams. […]

To receive a full copy of the white paper, please email Melissa Dainelli at [email protected].

For high-growth, founder-led businesses, a financing round isn’t just how much you raise – it’s how you structure it. Here is how using mezzanine debt, preference shares, and project finance alongside traditional equity and senior debt can help you bridge gaps, reduce dilution, and fund growth on your terms.

The Optimisation Problem

You’ve built a revenue-generating business. You’re profitable, or you have a strong asset base. When you look at your next phase, be it for major fleet capex, a strategic acquisition, providing some shareholder liquidity or managing your working capital due to “growing pains”– you already know the traditional toolkit.

Equity from founders, angels, or venture capital investors provides the risk capital and strategic support. Senior debt from a bank or alternative lender provides the low-cost, secured foundation. For most founders, these are the bedrock of any funding round.

We are increasingly seeing the value-conscious founders ask a different question. It’s not “Equity or Debt?”, but rather “As part of arranging my equity and debt, how do I fill the gaps between them without giving away more than I need to?”

This article explores how to use mezzanine debt, preference shares, and asset-level project finance to complement – not replace – your core equity and senior debt. The aim is to maximise total firepower while minimising dilution and maintaining control.

The Strategic Middle Layer

Think of your funding as a “capital stack.” At the base is your equity (the most expensive, but the most flexible). Above that sits senior, secured bank debt (the cheapest, but the most restrictive).

Between them, there is a strategic layer. This middle layer, which made up a significant portion of the £21.2 billion UK leveraged loan market in 2025. It’s not a replacement for your bank facility; it’s a complement that allows you to do more with that facility.

Two instruments are particularly effective in this complementary role:

• Mezzanine Debt

Often structured as a loan with cash interest and amortising or bullet repayments, depending on use of funds. Cost of funds are generally 10-14% and facilities rank subordinate (i.e. sits behind) to the senior bank (meaning the bank gets paid first), while often being unsecured, but ahead of your equity.

It fills the gap when the bank’s loan-to-value ratio or EBITDA multiple will not cover the full funding amount. However, there can be a form of small “equity participation”, such as warrants, where they share part of the future upside.

• Preference Facility

A hybrid instrument where an investor provides capital in exchange for fixed interest or dividend, which can be paid in cash or “paid in kind” (i.e. capitalised to the principal). Rank subordinated to senior and mezzanine debt. Cost of funds can be 10-12%, however as the Preference provider is taking closer to “equity-like” risk, they will generally seek some equity-like upside in their final return through an equity kicker, warrants or similar.

As a result, the effective cost of funds will be greater, but still less than further equity dilution. If you are a UK company raising funds through the Enterprise Investment Scheme (EIS), it’s important to know that only ordinary shares and not Preference shares, can be issued, in order to be qualifying for the tax break.

Building on a Senior Debt Foundation: Asset-Level Project Finance

For founder-managed businesses with strong tangible asset backing and contracted cashflows – energy infrastructure, long-term service concessions, property or leasing fleets – project finance can increase capacity without loading the operating company with all the risk. The UK market is mature here – SPV-style ring-fencing is standard in larger projects, however we regularly see lenders seeking to support projects, backed by the security of cashflows.

This is why an SPV structure can be attractive for founder-managed businesses with “project-like” economics: the lender underwrites the asset or project, and the operating group protects its core trading capacity. For a founder, this means your existing senior lending bank remains your cornerstone. The alternative layer simply allows you to do more within that relationship.

Applying this to the real world

For a founder-led firm considering equity and debt for funding, there are a number of scenarios where adding a complementary layer of funding unlocks more value:

• Capex Heavy Deployment (e.g. Leasing Fleets or Equipment)

The challenge for a company is to fund as much of the upfront investment as possible, while retaining working capital flexibility. Consider an asset financing facility, combined with existing cash and a senior revolving facility for working capital, with some mezzanine or equity to fund the gap.

• Funding Acquisitions

The challenge is to fund a large proportion of consideration with senior debt, but this will not necessarily cover all consideration or lend against earnings uplift from expected synergies. In lieu of further debt, new equity and/or vendor loan, a preference facility could provide additional funding while tempering equity dilution.

• Shareholder Liquidity (The “Secondary”)

It can be a challenge even for a profitable and cash generative company to buy out an early shareholder. To navigate any capital constraints, a company can issue a Preference share, with the proceeds used to buy out the departing shareholder, leaving bank facilities undrawn and no further dilution from new equity.

• Working Capital Mismatches

For a Company is suffering from “growing pains” (i.e. growing faster than existing cash and revolving credit facilities allow), the Company can pursue an asset-based option (Asset-based lending (ABL) facility) or cashflow based option (financing of future receivables). Utilising tangible assets or forward-selling a portion of receivables from a quality customer provides additional headroom, without further equity dilution.

Why structuring all funding concurrently matters

A blended funding round is more likely to work if the pieces fit together. A process run in parallel matters helps align key overlapping issues:

• Security and priority: who is secured on what, and the “payment waterfall” of who gets paid first;
• Covenants and headroom: how much flexibility you retain as a Company if growth is slower than planned;
• Intercreditor terms: what needs consent for acquisitions, disposals, dividends or refinancing; and
• Tax and regulatory constraints: EIS qualification, stamp duty, interest deductibility, among others.

How HMT LLP Can Help

As an independent corporate finance adviser, HMT LLP sits on your side of the table. We are not a lender, and we don’t sell products. Our role is to help Founder-led businesses like yours design and execute the optimal capital stack.

Our firm has over 33 years of advisory experience across M&A, Fundraising Advisory and Due Diligence, advising on over 675 deals, including 34 in the last 12 months. We work closely with Founders to help them achieve their growth ambitions.

We run competitive funding processes, where investors and lenders need to put their best foot forward, so that you achieve the best outcome.

Our goal is to ensure that when you raise your next round, you do so with a structure that funds your growth ambitions today while preserving your value for tomorrow.

For high-growth, founder-led businesses, a financing round isn’t just how much you raise – it’s how you structure it. Here is how using mezzanine debt, preference shares, and project finance alongside traditional equity and senior debt can help you bridge gaps, reduce dilution, and fund growth on your terms.

The Optimisation Problem

You’ve built a revenue-generating business. You’re profitable, or you have a strong asset base. When you look at your next phase, be it for major fleet capex, a strategic acquisition, providing some shareholder liquidity or managing your working capital due to “growing pains”– you already know the traditional toolkit.

Equity from founders, angels, or venture capital investors provides the risk capital and strategic support. Senior debt from a bank or alternative lender provides the low-cost, secured foundation. For most founders, these are the bedrock of any funding round.

We are increasingly seeing the value-conscious founders ask a different question. It’s not “Equity or Debt?”, but rather “As part of arranging my equity and debt, how do I fill the gaps between them without giving away more than I need to?”

This article explores how to use mezzanine debt, preference shares, and asset-level project finance to complement – not replace – your core equity and senior debt. The aim is to maximise total firepower while minimising dilution and maintaining control.

The Strategic Middle Layer

Think of your funding as a “capital stack.” At the base is your equity (the most expensive, but the most flexible). Above that sits senior, secured bank debt (the cheapest, but the most restrictive).

Between them, there is a strategic layer. This middle layer, which made up a significant portion of the £21.2 billion UK leveraged loan market in 2025. It’s not a replacement for your bank facility; it’s a complement that allows you to do more with that facility.

Two instruments are particularly effective in this complementary role:

• Mezzanine Debt

Often structured as a loan with cash interest and amortising or bullet repayments, depending on use of funds. Cost of funds are generally 10-14% and facilities rank subordinate (i.e. sits behind) to the senior bank (meaning the bank gets paid first), while often being unsecured, but ahead of your equity.

It fills the gap when the bank’s loan-to-value ratio or EBITDA multiple will not cover the full funding amount. However, there can be a form of small “equity participation”, such as warrants, where they share part of the future upside.

• Preference Facility

A hybrid instrument where an investor provides capital in exchange for fixed interest or dividend, which can be paid in cash or “paid in kind” (i.e. capitalised to the principal). Rank subordinated to senior and mezzanine debt. Cost of funds can be 10-12%, however as the Preference provider is taking closer to “equity-like” risk, they will generally seek some equity-like upside in their final return through an equity kicker, warrants or similar.

As a result, the effective cost of funds will be greater, but still less than further equity dilution. If you are a UK company raising funds through the Enterprise Investment Scheme (EIS), it’s important to know that only ordinary shares and not Preference shares, can be issued, in order to be qualifying for the tax break.

Building on a Senior Debt Foundation: Asset-Level Project Finance

For founder-managed businesses with strong tangible asset backing and contracted cashflows – energy infrastructure, long-term service concessions, property or leasing fleets – project finance can increase capacity without loading the operating company with all the risk. The UK market is mature here – SPV-style ring-fencing is standard in larger projects, however we regularly see lenders seeking to support projects, backed by the security of cashflows.

This is why an SPV structure can be attractive for founder-managed businesses with “project-like” economics: the lender underwrites the asset or project, and the operating group protects its core trading capacity. For a founder, this means your existing senior lending bank remains your cornerstone. The alternative layer simply allows you to do more within that relationship.

Applying this to the real world

For a founder-led firm considering equity and debt for funding, there are a number of scenarios where adding a complementary layer of funding unlocks more value:

• Capex Heavy Deployment (e.g. Leasing Fleets or Equipment)

The challenge for a company is to fund as much of the upfront investment as possible, while retaining working capital flexibility. Consider an asset financing facility, combined with existing cash and a senior revolving facility for working capital, with some mezzanine or equity to fund the gap.

• Funding Acquisitions

The challenge is to fund a large proportion of consideration with senior debt, but this will not necessarily cover all consideration or lend against earnings uplift from expected synergies. In lieu of further debt, new equity and/or vendor loan, a preference facility could provide additional funding while tempering equity dilution.

• Shareholder Liquidity (The “Secondary”)

It can be a challenge even for a profitable and cash generative company to buy out an early shareholder. To navigate any capital constraints, a company can issue a Preference share, with the proceeds used to buy out the departing shareholder, leaving bank facilities undrawn and no further dilution from new equity.

• Working Capital Mismatches

For a Company is suffering from “growing pains” (i.e. growing faster than existing cash and revolving credit facilities allow), the Company can pursue an asset-based option (Asset-based lending (ABL) facility) or cashflow based option (financing of future receivables). Utilising tangible assets or forward-selling a portion of receivables from a quality customer provides additional headroom, without further equity dilution.

Why structuring all funding concurrently matters

A blended funding round is more likely to work if the pieces fit together. A process run in parallel matters helps align key overlapping issues:

• Security and priority: who is secured on what, and the “payment waterfall” of who gets paid first;
• Covenants and headroom: how much flexibility you retain as a Company if growth is slower than planned;
• Intercreditor terms: what needs consent for acquisitions, disposals, dividends or refinancing; and
• Tax and regulatory constraints: EIS qualification, stamp duty, interest deductibility, among others.

How HMT LLP Can Help

As an independent corporate finance adviser, HMT LLP sits on your side of the table. We are not a lender, and we don’t sell products. Our role is to help Founder-led businesses like yours design and execute the optimal capital stack.

Our firm has over 33 years of advisory experience across M&A, Fundraising Advisory and Due Diligence, advising on over 675 deals, including 34 in the last 12 months. We work closely with Founders to help them achieve their growth ambitions.

We run competitive funding processes, where investors and lenders need to put their best foot forward, so that you achieve the best outcome.

Our goal is to ensure that when you raise your next round, you do so with a structure that funds your growth ambitions today while preserving your value for tomorrow.