Selling your IT managed services business to private equity

Where private equity stands in IT managed services (2026)

Managed service providers have become one of the most actively bought categories in the lower middle market, and private equity is the reason. A reported 169 MSP M&A deals closed in 2025, and about 69 percent of them were backed by private equity. The buyers are consolidators that assemble many regional MSPs into a national platform, then sell that larger, more predictable business to a bigger fund or a strategic buyer a few years later. Reported active acquirers include Evergreen Services Group, which reported 47 acquisitions in 2025 alone, along with New Charter, Ntiva, Integris, Coretelligent, and Magna5. Naming these platforms describes the market; it is not a recommendation of any of them.

For an owner, this means your likely buyer is a professional acquirer that has closed dozens of deals, while you are probably doing your first and only one. The demand is real, especially for providers with a security practice and a high share of recurring revenue. The rest of this page is about closing that gap: what drives your price, how the deal is put together, what you keep after tax, and what your working life looks like afterward.

What is my IT managed services business worth?

Value starts from EBITDA, your earnings before interest, taxes, depreciation, and amortization, adjusted for owner pay and one-time costs. The buyer applies a multiple. In 2026, reported ranges run about 3.5 to 5.0 times EBITDA for a smaller company under $5 million of EBITDA bought as an add-on, and well past 11 to 15 times for a large platform of $15 million or more of EBITDA, often $500 million or more of enterprise value. At the top end the reported median sits near 11.2 times, and cyber-heavy providers have reached around 20 times. These are ranges other sellers have reported, not an offer to you, and the spread between the add-on and platform bands is wider here than in almost any trade.

One factor moves your number more than any other: the share of your revenue that is contracted and recurring. A buyer pays for revenue it can count on after you are gone. Monthly managed services agreements renew on their own and produce steady cash, while project work and break-fix billing reset every month and often lean on your personal relationships. Two MSPs with identical EBITDA can land in different bands if one is mostly recurring and the other mostly projects. The other levers matter too.

• Recurring revenue mix, meaning the percentage of revenue under contracted monthly agreements. This is the point most specific to an MSP.
• Customer concentration, because a book where no single client is a large share of revenue is worth more than one that leans on a few big accounts.
• Net revenue retention, showing that clients stay and spend more over time.
• A real security and compliance practice, which lifts the multiple and drives the cyber-heavy premium.
• Documented processes and technician retention, so the business runs on systems rather than on you, with clean, reviewed financials and separated personal expenses.

The valuation page covers EBITDA add-backs and the working capital peg, and the calculator turns a headline multiple into an after-tax number.

How the deal is usually structured

The headline price is enterprise value, not your check. A typical MSP deal pays around 60 to 70 percent in cash at close. A rollover stake, often between 10 and 40 percent, is taken as equity in the buyer's holding company rather than cash, and platforms building toward a future sale often push the rollover toward the higher end because they want owners invested in the next chapter. Another 5 to 10 percent is held in escrow for a year or more against problems found after closing. A working capital peg sits alongside, requiring you to leave a set level of receivables and other working capital in the business, which can reduce the final number if you run lean.

On deals above roughly $10 million of enterprise value, representations and warranties insurance is common, shifting some risk from you to an insurer. Earnouts are more common in agency deals than here, but a provider with lumpy project revenue or a big pending contract may see a holdback tied to that revenue proving out. The deal terms glossary defines each term, and rollover equity covers the piece that stays at risk.

How you will be taxed

Most of your price is goodwill, taxed as long-term capital gain at 20 percent federal plus your state's rate. An MSP carries far less depreciated equipment than a trades business, so the depreciation recapture that surprises HVAC and electrical sellers is usually a smaller piece for you. Still, any servers, network gear, and hardware you wrote off using bonus depreciation or Section 179 can produce ordinary income under Section 1245 up to the amount you deducted, recognized in the year of sale.

A covenant not to compete is ordinary income to you at up to 37 percent, and consulting or transition pay is ordinary income plus payroll tax. The split between capital gain and ordinary income is set by the purchase price allocation in the contract, and the buyer is often indifferent to it while it costs you real money. The full mechanics, including the allocation form and the rollover's deferred tax, are on the how a sale is taxed page.

QSBS is worth a careful word, because an MSP sits in a better position than accounting or consulting firms. Section 1202 can exclude a large amount of federal gain, but only if your company was a C corporation when the stock was issued and for long enough after. An MSP is not on the list of excluded fields, so a recurring, systems-based managed services company generally can qualify if it is a C corporation. The caution is that a provider whose revenue is mostly project-advisory or pure consulting work looks more like the excluded field of consulting, which weakens the case. And most MSPs are S corporations or LLCs, which hold no QSBS at all, so the real question for most sellers is whether a C-corp conversion happened years before the sale. It is fact-specific and needs a written CPA opinion, so do not assume it applies. The QSBS page walks through the two gates.

What changes after you sell

After closing, you hold a cash check and you no longer own your company. Most platforms want you to keep running the business for two to three years, but as an employee inside their system. The tools you built the company on, from the professional services automation and remote monitoring platform to billing, ticketing, and the help desk, usually move onto the platform's shared stack. Your technicians may be folded into a common pool serving many clients. For an owner used to setting every process and standing behind every service level, that loss of control is often harder than the change in money.

Your income changes too. The salary and distributions the business paid you stop, replaced by a platform salary that is usually smaller, and by whatever the rollover pays someday. The rollover is a minority stake in a private, leveraged company you no longer control, and it may be worth more at the next sale or nothing at all. Plan your household around the cash you kept and treat any rollover payout as a bonus. The after-sale plan and managing rollover equity pages cover the money side.

Who should not sell right now

Selling to a platform is not right for every owner, and an offer can make the choice feel already decided.

• If your revenue is mostly project and break-fix work, you may get a much stronger price after shifting toward contracted recurring agreements, because that mix is exactly what drives the MSP multiple.
• If a single client or a handful of accounts make up a large share of your revenue, reducing that concentration first can lift both your multiple and the cash portion of your deal.
• If the business still runs through you, and the knowledge lives in your head rather than in documented processes, a couple of years spent building that bench can raise your multiple more than the offer in front of you is worth.
• If you cannot picture yourself handing your stack and your team to a platform and taking direction for two to three years, the cash may not be worth the working conditions.

What to do next

1. Raise the recurring share, then clean the numbers

   If you can grow contracted monthly revenue and reduce client concentration before you go to market, those changes can move you into a stronger band. Alongside them, get reviewed financials, clear contract records, and personal expenses separated, before any buyer conversation.

2. Model the after-tax number

   Run your expected multiple through the calculator, remembering that the wide gap between the add-on and platform bands means your size and mix change the outcome more than in most industries.

3. Check the two QSBS gates early

   Ask your CPA whether the company is or ever was a C corporation, and get the answer in writing, along with a read on whether your work mix raises a consulting concern. If it always was an S corporation or LLC, set QSBS aside and focus on the allocation, the structure, and the after-sale plan. See QSBS.

4. Plan the money before the check lands

   Decide how the cash will replace your income and how you will treat the rollover, using the after-sale plan. When you want a second opinion, the contact page explains how a first conversation works, including when we will tell you that you do not need us.