Market Update: Managed Service Providers Q1 2022
Managed Service Providers (MSPs) will remain attractive investments as buyers enjoy the nature of longer-term contracts with proven MRR. Coupled with the fact that MSPs have a customer-centric approach with a scalable land and expand model, 7MA sees M&A activity staying strong throughout 2022. Additionally, given the highly fragmented nature of the MSP space, M&A activity will continue to be abundant as sponsors and strategics look to increase scale and capture emerging technology market tailwinds to expand their geographic footprint.
According to MarketsandMarkets Research, the MSP market is expected to grow from $242.9 billion to $354.8 billion in 2026, with a 7.9& CAGR. Additionally, the MSSP (Managed Security Services Provider) market is expected to grow closer to 12-15% annually.
First-quarter 2022 recorded 56 deals – a 28% decrease compared with Q4 2021 most likely due to increased pressure to close Q4 2021 due to legislative discussion regarding tax increases. However, deal volumes and valuations remain high as:
- Cloud adoption continues to grow – by 2023, 40% of all enterprise workloads will be employed in cloud infrastructure – Gartner
- Companies implement advanced security measures to combat cyber terrorist
- IT automation becomes the new normal in our data-driven society
7MA has completed numerous M&A transactions in the MSP space and has developed unparalleled deal expertise and knowledge of the industry trends, valuation trends, and most active strategic and financial buyers. Please contact Tim Frye, Steve Buffington, or Tanner Lange if you would like to learn more about MSPs.