How to sell an MSP or IT services business

Selling a managed-services or IT-services business runs about six to twelve months end to end, with financial and contract preparation taking most of the time and roughly four to six months from a signed letter of intent to close. Diligence in this space is data-heavy: buyers will dissect your monthly recurring revenue, contract terms, churn, gross margin by service line, and customer concentration, so a clean revenue schedule and organized contracts are what keep a deal moving.

Buyer type sets the multiple. An individual operator or self-funded searcher typically pays 3.5-7.0x SDE. A search fund generally pays around 3-5x EBITDA, while a private-equity roll-up — and MSP roll-ups are extremely active — pays roughly 6.0-11.0x EBITDA, usually structured as 60-80% cash at close with the rest in equity rollover, a seller note, or an earnout. A strategic acquirer (a larger MSP or IT firm) can reach the high end when your client base, vertical expertise, or geography fills a gap for them.

Recurring revenue is the whole game. The higher your share of contracted monthly recurring revenue (managed agreements) versus one-time projects and break-fix, the higher your multiple — predictable revenue is what justifies 6.0-11.0x. Buyers also reward long contract terms, high net revenue retention, low customer concentration, a documented and repeatable service stack, security and compliance offerings, and a delivery team that runs without the founder. Each of those reduces risk and moves you up the range; heavy reliance on a single client or on you personally pulls it down.

Plan your after-tax proceeds before negotiating. Most of your gain is taxed at long-term capital-gains rates of roughly 15-20% federal, plus the 3.8% net investment income tax for higher earners (generally not owed by those who materially participate) and state tax, and asset deals usually tax the seller less favorably than stock deals. DealSeam works the buyer-paid side of IT-services M&A, connecting owners with vetted PE platforms and strategics where there's a real fit, and sellers pay nothing. We never guarantee a buyer or price; we help you understand value and who is acquiring.