In a fast-growing market like IT, acquisitions and takeovers are a fact of life. The focus of those acquisitions usually shifts from one much-hyped area to another, dependent on which technology or service is hot this year (or month).
Right now, AI is everywhere and companies have been raising incredible (as in the dictionary definition of ‘impossible to believe’) financing on the basis of amazing (as in ‘astonishing’ or ‘bewildering’) valuations.
But here in the channel, there has been quite a spate of activity in the MSP space. Drake Star’s recent Managed Service Provider Market Update Q2 2025 report noted that there were 92 announced M&A transactions in the quarter, “demonstrating continued momentum in one of tech’s most actively consolidating segments”.
The report noted that disclosed deal values were limited but “the strategic intent behind these acquisitions is clear: expand cyber security capabilities, automate operations, and solve for growing IT complexity”. Drake Star added that “IT services accounted for 83% of total M&A activity, as acquirers sought to bolster service delivery and scale across fragmented client environments”.
Given the scale of MSP consolidation, there are valid concerns for customers that need to be addressed, especially when it comes to the involvement of private equity firms in those acquisitions (although it’s worth adding that many of these concerns are common to all takeovers and acquisitions).
This is particularly relevant for SMEs who can fall victim to slower response times, reduced access to familiar support teams, and a breakdown in service accountability.
#notallacquisitions
As Darren Waters, centre of excellence director at Espria, a UK-based MSP, warned recently: “Acquisitions are usually framed as progress, but for many SMEs, they result in service degradation. The assumption that bigger is better doesn’t always hold true in IT support. Once a provider is absorbed into a larger group, priorities often shift toward financial outcomes rather than client service.”
Many channel companies are, by nature, SMEs or even SMBs, so they should be aware of the potential pitfalls of being absorbed by larger operators but that doesn’t mean they will be in any position to do anything about it if they are acquired.
As Waters notes, not every acquisition causes a decline in service because larger organisations can offer more resources and broader coverage, but “a shift away from personalised, relationship-led support often raises concerns about value and trust” for smaller customers.
Understandably so. And this isn’t something unique to acquisitions of MSPs. Channel companies often find themselves in a similar position to those smaller customers when one of their preferred vendors is snapped up by a larger rival.
And weirdly, the potential for providing an inferior service to smaller customers/channel companies can often undermine the intent behind larger MSPs/vendors or private equity companies making the acquisition in the first place. Quite often those takeovers are a means to expand the customer base but they can result in a reduction in the combined overall base.
The more bullish like to describe an acquisition as a case of 1+1 equals 3 but it can often turn out to be more 1+1 equals 1.5. You might not want to be in that missing 0.5, but it may well be that’s the best place for you to end up when the dust clears on the takeover. If so, it’s best to know that sooner rather than later so you don’t waste your time (or your customer’s) hanging on to something that turns out to be inferior to what it was before.
That’s not always easy. After all, if the people parting with cash to make the acquisition haven’t worked that out it can be hard for the customer to do so. But the motivations for decisions vary widely and one of the big lessons we can all learn from acquisitions over the ages is that what often appears to make perfect sense to one party can be much harder to understand to someone else. If you don’t believe me, just take a look at the insane (as in ‘absurd’, ‘idiotic’ or ‘crazy’) money being thrown at AI right now.
Ltd
