Evergreen has no intentions to slow down its recent M&A activity in the ANZ region, with three more deals set to close in the next month for the serial acquirer.
The US-based organisation, which bills itself as 'a family of managed services and software companies', told techpartner.news that its aiming for a 'stretch target' of 25 MSPs in its ANZ stable by year-end, five more than the current number.
In 2025, it acquired both Blackbird IT and REDD, before making its largest acquisition in the ANZ region in June of this year, welcoming WA-based Office Solutions IT to its portfolio.
The next focus? Geographies where Evergreen doesn't already have dedicated businesses in.
"We cover most of the ANZ market now, but the two places we'd like to expand [are] within the Northern Territory and Tasmania," said Zaun Bhana, the company's director of MSP M&A for ANZ, based in Perth.
"The one other element that we have is our new Pine Services Group acquisition of Stratus Consulting Group. We continue to see the ERP opportunity, we continue to see the Microsoft Dynamics [opportunity] and we think that will mirror the growth that we've had in the MSP division."
Sydney Hockett, the company’s vice president of M&A based out of San Francisco, attributed the constant pace of acquisitions to the fact that every time Evergreen thinks it has the local market mapped, "more good businesses pop up".
"I think [Australia] is a particularly interesting economy because it is so driven by SMBs, more so than anywhere else, so the customer base is huge," she explained.
"There's an interesting thing happening where businesses are starting to grow faster; there's companies that started five or six years ago and wouldn't have been on anyone's radar that are now of a size that is interesting to buyers."
“A conversation doesn’t mean it’s a transaction”
Despite the flurry of activity the company has seen in the last 18 months, Hockett said one of the big mistakes she sees MSP owners make is not speaking to buyers – Evergreen or otherwise – until being ready to sell.
She said doing so is a “disservice” to the MSP owner’s business, a sentiment Bhana agreed with.
Evergreen typically starts talking to the majority of businesses they acquire three or four years prior to closing the deal, Hockett explained, as that ability to track those companies over time – looking at whether the leader executes on what they promised or assessing how the business has grown – means Evergreen is “far more likely to have confidence in a higher valuation for those businesses”.
“Picking a select number of folks to start talking to early is very valuable, but people seem to not want to do that because they feel obligated to do something [when they do start that conversation],” she said.
Bhana described the misconception some business owners have about that opening conversation of selling as “expecting it to be a firework event [when] it's more of a slow burn”.
“The earlier they're engaged with anyone - not just us - the greater you see their valuation because we have evidence of progress, you can see their management capability, you can see how well they operate,” he explained to techpartner.news.
“A conversation doesn't mean it's a transaction; it's just a way to help them on that journey.”
Misconceptions abound about EBITDA, revenue expectations
Hockett and Bhana also shared with techpartner.news a number of other misconceptions they see from MSP owners when acquisition is being considered – most notably around EBITDA and revenue.
Hockett said she has found that there tends to be an inclination from sellers to increase EBITDA as much as possible to prepare the company for sale, due to the belief that a higher EBITDA equals more money.
“For us, we're going to look at that and say, 'this business has been starved for sale, it's over-optimised, and we're probably going to have to invest more in it after we buy it',” she noted.
“We would prefer to see a business that has slightly more staff than they need today, or they've invested in growth, so we're going to be able to capitalise on that margin expansion opportunity with them.”
Elsewhere, Hockett said that while building proprietary tools is great, “it is one in 100 [companies] that's getting valued on a software multiple for the tool that they've built".
She also cautioned business owners looking to sell about focusing on “the wrong types” of recurring revenue.
“Recurring product resale [revenue] - whether it be cloud, Office licences, telco etc - is a great add-on and makes you sticky, [but] that is not the same value as your recurring managed services revenue,” she explained.
“A business that is 50% licence resale, 20% managed services is a lot less valuable than one that's 50% managed services revenue, 20% resale.”
For Bhana, he believes that MSPs are over-indexing on the need to be an MSSP.
This is resulting in aspirations such as MSPs having their own Network Operations Centre or a variety of different cyber offerings, he said, but the reality is “most of the large vendors are already putting out world-class services in that space”, so an MSP’s competitors are just reselling those services and providing the exact same offering, “sometimes [at] a lot lower price”
“Unless there's a sovereignty angle to it, the majority of MSPs would be better served to do a fantastic job of cross-selling cyber to their base as a managed service rather than trying to turn it into its own entire business unit and expecting that's going to drive up multiples,” he said.
AI and automation plays not increasing value yet
Despite MSPs seeking a new line of revenue from adding automation and AI offerings to their services, it isn’t yet something that Evergreen is paying higher premiums for when it come to acquisitions.
Hockett explained that this is mostly owing to there being a lot of definitions for what ‘successfully deployed’ automation and AI means.
“I don't think there's a right answer to that yet, and I don't know that anyone can claim that they have 100% done that,” she told techpartner.news.
“We are still very interested in a solid MSP with great customers; I think it matters more about the base business and the types of relationships they have with their customers, such that they will be able to sell those higher value, higher price services into their customer base.”
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