Thinking Of Buying Or Selling An MSP? Here Are 6 Tips From Experts
CRN coverage of a NexGen+ 2021 panel on buying and selling MSPs, quoting Nathan Phinney on exit strategy and his firm's acquisition.
By Joseph F. Kovar, CRN, November 17, 2021, covering a panel at The Channel Company’s NexGen+ 2021 Conference. CRN printed Nathan’s title as “Nathan Phinney, the director of business development at Datapath, an Irvine, Calif.-based solution provider” (as printed by CRN).
What Nathan said
“It’s a tremendous incentive for businesses to combine, to merge, and to be acquired,” he said. “And you can see the effects of that in the market right now.”
“It’s important to know what your exit strategy is, even if it’s to die at your desk,” he said. “But if you haven’t started thinking about that, that would be the most important thing that you can take away from here. There’s other opportunities out there, and it’s not in everyone’s blood to stay in the same [company].”
“[Buyers are] trying to take your temperature and see is this business actually going to sustain itself without lots of intervention, because the buyer wants a functioning system,” he said. “They want to be able to take the best things that you did and keep them. And they want you to come into their systems and processes to fix things that maybe you’re not doing as well.”
“We gave them a tour and everything, and they got to meet a couple of the employees,” he said. “I don’t know if that’s common, but that was something that was really important to them. We also flew out to their offices and did the same dance. So we knew quite a bit about those organizations before we approached the transaction.”
“It’s like everybody got a kind of promotion the day we were acquired,” he said. “And we presented it as a celebration of something that we had accomplished together. But it was hard in the days leading up to the transaction, being so excited and so nervous and not being able to tell anyone. It was challenging for us.”
CRN reported: Phinney said his company was started with the idea that the founders would run it for 10 years and then sell. And while the time to sell fell squarely during the COVID-19 pandemic in 2020, the founders followed through on their exit strategy.
CRN reported: Phinney said that when his firm was sold, the buyer was looking for such things as recurring revenue, long-term contracts, and happy customers.
CRN reported: Phinney said Datapath executives did just that, visiting Bright Bear as if they were customers to understand his company’s culture.