Managed Service Providers (MSPs) play a critical role in modern IT. As more businesses outsource their infrastructure needs, the sector continues to grow fast. With that growth, MSP valuation multiples have become a key focus for investors and buyers.
The market is crowded, with thousands of MSPs worldwide. Larger firms are actively acquiring smaller players to expand their services and reach. This has created a highly active M&A environment.
Valuation in this space depends on several factors. The most important are recurring revenue, client retention, and EBITDA margins. Buyers reward MSPs that are efficient, predictable, and scalable.
In this article, we explore valuation trends in both private deals and public markets. We also break down the factors that drive higher multiples, and what founders can do to position their businesses for a premium exit.
Table of Contents
- MSP Overview
- Service Portfolio
- Service Diversification
- MSP Market Size
- MSP Valuation Multiples
- Size Effect on MSP Valuation
- Understanding MSP Valuation Drivers
- Summary
- About Aventis Advisors
MSP Overview
Managed Service Providers offer a diverse range of IT services that help businesses optimize operations and technology infrastructure. These services include network management, data protection, cybersecurity, and cloud solutions.
Outsourcing IT functions to MSPs allows companies to focus on core priorities while leveraging specialized expertise and cutting-edge technology.
According to Clutch, MSP services can be categorized into key areas:
- Network management, ensuring a company’s IT infrastructure remains robust, secure, and efficient.
- Data backup and recovery, protecting against data loss and enabling quick restoration in emergencies.
- Cybersecurity services, such as managed security and intrusion detection, to defend against cyber threats.
- Cloud management, helping businesses leverage scalable and flexible cloud solutions.
- Help desk support, providing timely technical assistance to minimize downtime and improve productivity.
Most MSPs go beyond providing services. They also supply hardware, resell software licenses, and cloud services, operating within a broad and flexible business model.
Service Portfolio
Our analysis of Clutch data on MSPs reveals that cybersecurity services are in high demand due to the increasing frequency of cyber threats. Businesses are prioritizing the protection of their data and IT infrastructure, making cybersecurity a critical focus area. Security services currently lead the most popular MSP specializations, accounting for 32%, driven by growing cyber threats, compliance requirements, and the adoption of zero-trust security frameworks.
Network services is the other common area of focus reflecting the demand for scalable connectivity amid the rise of hybrid work models and cloud adoption. Meanwhile, managed hosting services, with a 27.4% market share, highlight a growing trend toward outsourcing infrastructure to achieve cost efficiency and scalability.
Service Diversification
With strong access to clients, many MSPs are expanding their service offerings to provide a one-stop-shop service. Diversification has become a key strategy, helping MSPs mitigate risks and enhance efficiency. This approach enables MSPs to bundle services together, delivering tailored solutions that align with specific business needs.
Our analysis of Clutch data reveals that many MSPs are expanding their portfolios by offering additional services beyond core managed services. Notably, 40.8% of MSPs provide IT strategy consulting, reflecting a strong demand for aligning IT infrastructure with business goals. Managed security services, offered by 32.3% of MSPs, emphasize the critical need to address evolving threats. Cloud consulting and systems integration, at 30.1%, highlight businesses’ focus on operational optimization and scalability.
MSPs sometimes offer IT staff augmentation and custom software development, but larger offshore providers typically handle these broader services.
MSP Market Size
The global MSP market is set to grow rapidly as more businesses rely on outsourced IT services. Market forecasts predict that the MSP sector will expand from USD 312 billion in 2023 to USD 658 billion by 2030, reflecting a compound annual growth rate (CAGR) of 11.4%. This strong growth highlights the growing importance of MSPs in supporting business operations and their expanding role in the global economy.
Several factors are driving the impressive growth of the MSP market. The ongoing digital transformation across industries is a major catalyst, as businesses modernize their IT infrastructure and adopt emerging technologies. The demand for cloud migration services is increasing, allowing companies to benefit from the scalability and flexibility of cloud computing.
The growing complexity of IT environments and the need for specialized expertise are also key contributors to market expansion. Both small and large MSPs are broadening their service offerings to address evolving client demands. As a result, MSPs are expected to gain a larger market share by delivering cost-effective and efficient IT solutions.
Several key factors and trends are shaping the MSP market’s growth. The rapid advancement of technologies like artificial intelligence and machine learning is creating new opportunities for MSPs. These technologies enable innovative solutions that enhance operational efficiency and drive business growth.
MSP Valuation Multiples
Private M&A Transactions
Investors rely on EV/EBITDA to value MSPs because these service-driven businesses generate steady cash flow and need little R&D.
Our analysis of disclosed valuation multiples for 120 MSP transactions revealed a median multiple of around 8.9x EV/EBITDA. It is important to highlight that the median transaction size was $38.5M.
Our experience and market observations indicate that valuation multiples typically range from 5-8x EBITDA for smaller companies and can drop to 3-4x EBITDA for the smallest businesses with revenues under $1-2 million.
Listed MSP valuations
Challenges in Benchmarking Public MSP Valuations
One of the main challenges in assessing public market valuations for MSPs is the lack of pure-play MSPs among listed companies. Despite a proliferation of MSP roll-ups in the United States and abroad, none of them have listed so far to provide a strong benchmark.
Most firms providing managed services do so as part of a broader IT services or software portfolio rather than operating exclusively as MSPs. This effect is even more pronounced when looking at larger public companies, where managed services often represent just one segment of a diversified business model.
As a result, direct valuation comparisons are difficult, as financial metrics are influenced by revenue streams from areas such as software licensing, IT consulting, system integration, and cloud product sales. Nonetheless, to establish meaningful valuation benchmarks, we have identified a group of publicly listed companies that represent the MSP sector.
Selected Public MSP Comparables
For our analysis, we selected 10 listed companies with a significant portion of their business in managed services. While pure-play MSPs are relatively rare, our sample collectively provides a relevant reference point for industry valuation trends.
EV/EBITDA multiples for MSPs
Since MSPs are service-oriented businesses with relatively low capital intensity, EV/EBITDA is the primary valuation multiple used by investors and acquirers. This metric provides insights into a company’s ability to generate operating profit and its efficiency in converting revenue into cash flow.
Historical Trends in EV/EBITDA Multiples
- The median EV/EBITDA multiple for MSPs has fluctuated significantly over time, ranging from 7.8x (H2 2018) to 17.5x (H1 2021)
- The highest valuations were recorded during the post-COVID tech boom, when investors prioritized IT services and cloud-driven business models
- The median EV/EBITDA multiple in H2 2024 stands at 11.4x, reflecting a return to pre-pandemic levels
EV/Revenue multiples for MSPs
The EV/Revenue multiple serves as a high-level indicator of how investors perceive a company’s growth potential, recurring revenue composition, and market position. However, it is important to note that due to the wide variation in margin profiles across IT services businesses, revenue multiples can be less useful when comparing MSPs.
Historical Trends in EV/Revenue Multiples
- The median revenue multiple for our selected MSPs has ranged from 0.5x (H1 2020) to 1.5x (H2 2021), with fluctuations driven by macroeconomic conditions and industry trends
- In H2 2024, the median EV/Revenue multiple stands at 1.3x, slightly above the long-term average, reflecting stable investor sentiment toward MSPs
This data suggests that revenue-based valuations for MSPs remain relatively modest, emphasizing the importance of profitability and recurring revenue growth for achieving higher valuations.
Size effect on MSP Valuations
Larger MSPs command higher valuation multiples, benefiting from stronger cash flow, higher recurring revenue, and key client contracts. In contrast, smaller MSPs face significant discounts, as buyers perceive them as riskier, with lower scalability and growth potential.
While the data available primarily reflects overall IT services valuations, we can infer MSP valuation trends based on industry-wide M&A activity. The table below presents median EV/EBITDA multiples for IT services firms of different sizes, with MSP-specific multiples interpolated to reflect their typical positioning within the sector.
Understanding MSP valuation multiples
The table provides EV/EBITDA multiples for IT services firms across various deal sizes, illustrating the well-documented size effect in M&A transactions. Larger firms consistently trade at higher multiples, benefiting from greater economies of scale, diversified customer bases, and stronger recurring revenue streams.
To estimate MSP valuations, we first analyzed 10 publicly traded MSPs, calculating their monthly median EV/EBITDA multiples from 2018 to July 2025. We then determined the overall median of these medians, arriving at a reference valuation of 11.2x EV/EBITDA. This figure serves as a benchmark for MSPs involved in transactions exceeding $500 million.
Applying the size discount
Smaller MSPs rarely achieve that 11.2x benchmark. To reflect their risk and lower efficiency, we applied size-based valuation discounts. These discounts were based on IT services transactions, where smaller firms consistently trade at lower multiples.
We used this method to interpolate MSP-specific multiples across deal sizes. The results show a clear pattern: as MSPs scale, their valuations improve.
Valuation ranges by deal size
- Under $5 million: Valuations average around 5.0x EV/EBITDA, reflecting a 55% discount. These firms often show high volatility and weaker margins
- $20–50 million: Mid-sized MSPs reach approximately 8.1x EV/EBITDA. These businesses usually offer stronger operational efficiency and more stable recurring revenue
- $500 million and above: At this scale, MSPs achieve 11.2x EV/EBITDA. These firms benefit from economies of scale, diversified client bases, and enterprise-grade contracts
Why scale matters
The size effect in M&A is well established. Larger MSPs are more efficient, more predictable, and more attractive to both private equity and strategic buyers.
Buyers especially value MSPs with:
- Strong recurring revenue
- Low customer churn
- Broad service portfolios, particularly in cybersecurity and cloud services
In short, the bigger and more efficient the MSP, the higher the multiple it can command. For owners, scaling operations and improving key metrics is the clearest path to a premium valuation.
Key Takeaways:
- Smaller MSPs trade at a significant discount compared to larger firms, with sub-$5M MSPs estimated to trade around 5.0x EV/EBITDA, while firms valued over $500M can achieve 11.2x EBITDA multiples
- Mid-sized MSPs ($20M-$50M) are likely to be valued around 8.1x EBITDA, in line with broader IT services market trends
- The size effect is driven by operational efficiency, customer retention, and recurring revenue streams, all of which improve at scale
For MSP owners looking to maximize valuation, increasing recurring revenue, expanding service offerings, and reducing customer churn are the main factors that drive higher multiples. Buyers, particularly private equity firms, actively seek MSPs with strong recurring revenue, a scalable customer base, and specialized high-demand services. Key areas of interest include cybersecurity services, cloud solutions, and key client contracts. Smaller MSPs looking to attract the right buyer need to optimize operational costs, demonstrate future growth potential, and highlight their ability to retain customers while continuously acquiring new customers.
Larger MSPs and larger companies in the IT services space often use acquisitions as a strategy to increase market share, improve efficiency, and enhance EBITDA margins. By acquiring smaller MSPs at a discount, they can scale their service portfolio and strengthen long-term valuations. This consolidation strategy allows them to capture more recurring revenue, expand their customer base, and improve gross margin through operational efficiencies.
Ultimately, scale drives value. MSPs that build recurring revenue, invest in cloud services, and focus on cybersecurity will see higher multiples, whether in private M&A transactions or public markets. Expanding service offerings, improving net income, and demonstrating a strong track record of client retention are all critical factors in achieving a premium valuation.
Understanding MSP Valuation Drivers
Business factors influencing MSP valuations
Business focus
Cybersecurity firms tend to command higher valuation multiples due to the essential nature of their services. In contrast, Value Added Resellers (VARs) typically receive lower multiples, as their profit margins are generally thinner.
Recurring revenue
MSPs that prioritize service-based models and maintain strong recurring revenue from a loyal client base are valued significantly higher than VARs, which depend more on hardware sales or one-off implementation projects.
Customer churn
A key factor in MSP valuations, customer retention rates—ideally above 90%—signal business stability and are highly attractive to investors.
Understanding these key metrics allows MSP owners and investors to make informed decisions regarding business valuation and potential acquisitions.
By optimizing factors such as customer retention and revenue consistency, MSPs can enhance their market value and attract potential buyers. Additionally, client contracts, revenue streams, and operational costs are crucial considerations for buyers assessing MSPs.
Creating Competition in the deal
MSPs have become one of the most sought-after targets in the M&A market, particularly in the United States. In the segment of MSPs generating more than $1 million in EBITDA, there are consistently more buyers than sellers. This supply-demand imbalance creates a favorable environment for sellers, as strategic and financial buyers are aggressively competing to acquire MSPs of scale.
One of the most effective ways to maximize valuation in an MSP sale is to run a competitive M&A process. When multiple buyers are involved at the same time, the seller gains more leverage. This improves the chances of securing a higher purchase price and better deal terms.
To create this competitive environment, sellers have two main options. They can either work with an M&A advisor, such as Aventis Advisors, to reach a wider pool of buyers and manage a structured process. Alternatively, they can run the sale themselves by contacting interested buyers directly.
Working with an advisor helps streamline the entire process. Advisors provide access to more buyers, manage confidentiality, lead negotiations, and save time. This allows MSP owners to stay focused on running their business while the advisor works to optimize the deal.
If the owner chooses to lead the process independently, they need to identify likely buyers. These are often firms that have shown previous interest or are known for acquiring MSPs. Reaching out to several buyers at once is essential to create competition and increase the valuation. However, the owner must also manage all aspects of the deal. This includes negotiation, due diligence, and ensuring that legal, financial, and operational details are handled properly.
Summary
The MSP market is poised for growth, driven by technological advancements, evolving regulatory requirements, and the growing demand for cloud migration services. Key factors such as customer retention and monthly recurring revenue are crucial in determining MSP valuations. By prioritizing these metrics and enhancing operational efficiency, MSPs can achieve higher valuations and attract potential buyers.
Strategic planning and staying informed about market trends are essential for sustained growth and competitiveness in this rapidly evolving industry. A clear understanding of the factors influencing valuations enables MSPs to navigate the market effectively, ensuring they remain competitive and well-positioned for future success.
About Aventis Advisors
Aventis Advisors is an M&A advisor focusing on technology and growth companies. We believe the world would be better off with fewer (but better quality) M&A deals done at the right moment for a company and its owners. Our goal is to provide honest, insight-driven advice, clearly laying out all the options for our clients – including the one to keep the status quo.
Get in touch with us to discuss how much your business could be worth and how the process looks.
