The techpartner.news podcast, episode 6: How to get acquired: Brennan’s Dave Stevens’ guide for MSPs

Brennan’s founder and managing director Dave Stevens has shared his advice for small IT service provider owners in an industry where acquisition activity is heating up.

On the latest episode of the techpartner.news podcast, Stevens talked through a range of factors that he and his peers consider when they are looking at potential acquisition targets beyond region and vertical specialty.

Plus, he offered a thorough explanation on what managed services provider (MSP) owners should do when they’re preparing to sell.

Brennan is one of Australia’s biggest players in the IT services industry and has been acquiring to increase its own capabilities and scale for at least 15 years.

Most recently, it acquired CBR Cyber, which added deeper high-end networking security capabilities to Brennan’s stable.

Stevens said one of the most important things they look for when assessing a company is culture, but how most might think of it.

He said things like employee recognition and work from home policies are the “fluffy side of culture that doesn’t really matter”.

An example of culture that does matter, Stevens offered, is how staff react when a customer presses them for a discount.

“If we then acquire that company and all of their people have been used to being told yes to requests like that, and we start saying, no, don't pass on that discount … it actually starts to then erode the customer value proposition," he said.

“When you take 50 of those examples and put it together, that's culture.”

In addition to operational suitability, Stevens explained the capabilities they are on the lookout for.

He outlined two perspectives that they take when assessing a potential acquisition’s skillset.

The first is if they are looking to expand into new geographies.

“What we're looking for there is a similar set of skills to what the Brennan core business has," he explained.

"Heavy on managed services, good quality sales team (and) SDMs (service delivery managers – so we're looking for a well-rounded, capable, company.”

On the other side is when they are looking to expand their capabilities into new areas.

For example, he said, Brennan is Microsoft-centric and doesn't have deep expertise in the likes of ServiceNow, Salesforce, SAP and others.

“When we acquire on those sides of the world, we are looking for the experts," he said.

"So if it's AWS, I want deep skills in AWS, I want DevOps skills, I want FinOps capability, I want agile project delivery capability. I want the deep experts and they'll become a practice inside our world.”

Stevens also offered several pieces of advice for those who might be ready to put their MSP on the block, including that most probably shouldn’t go through brokers.

He said there can be benefits to going with a broker, but they likely don’t outweigh the negatives.

“The downsides are they are super expensive and often want some sort of success fee that's a percentage of the money that you're gonna get," he said.

"They will tend to want to run a competitive process and that might have some benefits in terms of getting you a slightly better outcome, but I don't think it does, to be honest.”