Value creation within the IT MSP sector

On Thursday 30 April 2026, HMT, together with YFM private equity, had the pleasure of hosting a dinner discussion for the leaders of IT Managed Service businesses in Central Reading. Along with Wendy Hart of HMT and David Wrench of YFM, the discussion was seeded and guided by Peter Sweetbaum, long term ex CEO of ECI-backed Content and Cloud and now Chair of Focus Group (amongst other things!) The discussion was refreshingly open and, without breaching the confidences of those present, the purpose of this brief article is to summarise the themes of the debate and to draw together some of the conclusions reached by the parties present.

Our dinner guests represented a wide cohort of Managed Service Providers from early-stage specialist businesses to much larger MSPs with a wide range of offerings. Despite this, there was a remarkably consistent view of the path to value for MSPs in today’s market and a remarkable consistency of preoccupations for those leading them.

Introduction

We began by discussing the reasons that MSPs have historically been attractive for investors and acquirers, leading to considerable consolidation in the space over the period since the global pandemic of 2020 to 2021. As an initially fragmented sector, simple “for scale” buy and build strategies in the space had permitted investors to bolt together a range of diverse SMBs to deliver cost synergies and multiple arbitrage. This represented a clear and straightforward exit route for the founders of such businesses and was for a while, a win-win.

The view around the table was that some of the M&A associated with this strategy has been poorly executed, resulting in deals focussed on scale for scale’s sake and a lack of meaningful integration. As a result, more recent buy and build strategies have been focussed on filling capability gaps, building vertical credibility and pricing acquisitions more sustainably; a more challenging scenario for sellers and buyers but a clearer eye line to value creation.

This led to a discussion of the ways in which current MSP leaders can best build value in their businesses and a strong steer from both Peter and David (as acquirers and investors of such companies) that a “distinct and compelling” offering, whether it be of technical capability or vertical understanding is the most direct route to value. While measurable ARR will continue to have value for its predictability, there is an increasing acceptance that professional services play a fundamental role in the MSP customer journey; not only contributing to effective and sticky deployment but also creating the differentiation which is a prerequisite of attractiveness as an acquisition target.

While Private Equity and Buy and Build Trade acquirers will continue to have a checklist for the “perfect” acquisition, the mix between professional services and repeatable services is no longer a fixed point on the list. Similarly, while there has traditionally been a tendency to disregard low margin high volume businesses in the space as “commodity”; investors and acquirers are now more willing to look behind the margins to better understand the degree of customer dependency, repeatability and differentiation offered by an individual company.

Inevitably a large part of the evening was spent discussing the role of AI in the MSP space and the wider “panic” around its impact on pricing and value in the sector. It was generally conceded that AI is taking up a lot of board room airspace. It was also conceded, however, that much of the internal debate around AI is currently speculation and hypothesis. All of the businesses present were actively considering how to use AI to reduce cost and increase efficiency, for example around incident analysis and response; but none were actively yet building an AI proposition as part of their customer offering and this was felt to be a little way off yet. Not least because of customer trust. IT services, selfevidently, are business-critical for most MSP customers.

It was felt that over the coming months, AI and the perception of its use in MSP services, was likely to lead to pricing discussion and a shift over time to value pricing for professional services rather than time-based pricing. It was also felt that there was a clear role for AI in terms of customer experience, using agentic models to triage issues and deliver front line advice. Undoubtedly MSPs will see some pressure to reduce the size of service desk teams as AI agents come into play and there have already been attempts to monetise AI solutions in some parts of the market.

We dragged ourselves away from the fascinating, thorny and currently unresolved question of the place of AI in IT MSP services to think about what “distinct and compelling” really means in the MSP context.

Areas of differentiation

Recognising that core IT services are coming under pressure from broader price sensitivity as well as a wide range of SMB providers the following were felt by our guests to be areas of differentiation and real value;

• The collection, analysis and re-presenting of customer data (individual or collective) to deliver insights and predictions
• Deep verticalization, permitting distinct industry solutions and proprietary knowledge in professional services including self-generated IP.
• Pattern mapping in the consumption of products and services in order to offer and deliver packaged solutions that directly address customer needs
• Solutions which are embedded deep within customer operations and demonstrably both sticky and business critical

The above factors seemed to play out across MSPs of different scale and focus, with several of our guests referencing occasions where it had been customer relationships and trust in delivery that made a substantive difference to winning or retaining work.

That brought us to the final discussion of the evening which surrounded the question of scaling and succession for the founders and leaders of IT MSPs. It was deemed that the energy and personal commitment of founders to the success of their business, and the passion for their proposition, played a material role in early sales success. This played out in the clarity with which they articulate the proposition as well as the personal investment in high quality delivery. We discussed the challenges of transitioning from a situation where the founders lead the business to a scaled entity, where a professional sales function can take-over. Drawing on the experience of some of the larger businesses represented and of Peter and David themselves, it was agreed that such transition needs to be undertaken slowly and with long periods of handover and co-working and that it puts the recruitment of senior hires firmly at the heart of successful scaling. It was well recognised around the table that an exit is all but impossible if a founder still sits at the heart of sales.

To summarise, at the end of a delicious dinner and an enthusiastic and participative discussion, we concluded that the focus of IT MSP owners should be on delivering organic growth through focus, differentiation and intelligent packaging of solutions, that M&A strategies should be capability focussed and not driven purely by revenue scale and multiple arbitrage and that AI should in the short term be directed at increasing business efficiency and improving the customer experience. While “founder-power” can move mountains, the prize comes from scaling business without loss of energy and culture.

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