There are two primary paths to growing an MSP: organic growth and mergers & acquisitions (M&A).
The latter is far speedier. However, many business owners don’t consider M&A because breaking into the sphere seems daunting.
Fortunately, Sierra Pacific Group (SPG) recently hosted a webinar where we outlined how MSPs can approach M&A for success and longevity.
In Part 1 of this recap, we cover:
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Why IT providers should consider growing via M&A
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Why acquisitions alter division of labor
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Tips & tricks for the first stages after M&A
Let’s dive in.
Why IT providers should consider growing via M&A
The ability to scale quickly is key to your MSP beating out its competitors.
And M&A is one way to achieve that. It can set you on the path to successful, rapid growth — if you prepare appropriately for it.
There are several reasons why an IT business should consider M&A.
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You took on outside investment — Now, you need to make good on that investment.
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Current employment markets — Sustained growth is required to attract top talent.
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The costs of being a successful MSP — There’s a hefty price tag attached to running a thriving business. To stay successful, ensure you have a significant revenue base.
How to prepare your business for M&A
We understand it’s daunting to break into M&A as an IT provider.
That’s why SPG has collected expert knowledge to make M&A more straightforward. For instance, to successfully attempt M&A, you should have:
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A certain amount of flexibility and risk tolerance
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The ability to maintain profitability and growth throughout the M&A process
One of our experts, Pete Sholts, VP of Business Strategy at Applied Tech, knows how much M&A can transform your business systems and what it takes to reach that transformed state.
He suggests that when trying M&A for the first time, companies should:
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Prepare to change their hiring techniques
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Develop healthy mechanisms for coping with the stress of rapid changes
Ask yourself, “How can we build a company where every single team member successfully makes it through this M&A?”
Why acquisitions alter division of labor
Adam Bielanski, our Founder & CEO at SPG, is an engineer at heart.
With his business, he concentrates on dialing in on his toolkit while acknowledging that many intangibles drive change and progress.
Essentially, to have both the tactical toolkit and that certain je ne sais quoi, it’s critical to implement what he calls a culture of “putting in the time.”
And that’s a task in and of itself. When you acquire another company, you must introduce and implement that culture within the new organization.
Acquiring a company may change your MSP
Smaller MSPs may find a notable shift in terms of division of labor.
If there were only a dozen of you pre-merger, there was less division of labor. Post-merger, you have way more employees, and everyone is responsible for a more specific set of tasks.
This is a massive benefit for everyone because:
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It increases balance in the workplace
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It further defines individual roles
For instance, while COVID was a hit to the workplace in many ways, it also served as an opportunity to test how your company might react in an M&A scenario. After all, company culture isn’t just about the four walls of an office building.
Consider whether remote work totally wrecked what your business had pre-pandemic. Or, if you struggled, you now know what you need to overcome.
Tips & tricks for the first stages after M&A
Post-M&A, people often kick off with automation because they want to streamline this new bulk of property — that’s a great instinct.
It’s vital to have everything structured appropriately from the get-go.
One key aspect of that is proper security.
To be more specific: Don’t give everyone access to everything. Later on, you’ll have to backtrack and likely take admin keys away from people who shouldn’t have had them in the first place.
Take the time to conduct a discovery phase
At SPG, we make sure to begin the automation absorption with a discovery phase.
We take stock of what we have — reviewing the acquisition, its size and endpoints, and any additional resources we may need to bring in to ensure success.
Identifying potential hurdles beforehand creates a far smoother transition throughout and sets appropriate expectations early on.
Don’t overlook these 2 components of M&A transitions
In Pete’s experience, MSPs can often overlook two aspects of the post-M&A transition:
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People — Before you dive into tooling and automation, consider the organization’s key players and culture. Nothing will function without them. Plus, they’re critical to streamlining relationships with the new clients you’re gaining.
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Difficult workplace conversations — If there are any toxic aspects within the team and workplace you’re acquiring, sort them out ASAP. Do not avoid conversations about admin rights or new responsibilities. They’ll only get harder with time.
These variables also go hand in hand.
For instance, changing people’s titles or taking away their admin rights can create mistrust from day one. So, explain why roles or access rules are being refined for the new company structure.
When companies grow, individual roles inherently shrink.
It’s not an insult in the least, but your employees won’t know that without your reassurance.
