Webinar recording – Unlocking value: the new dynamics of M&A in the UK MSP and IT consulting sector
Key insights from the Moore Kingston Smith IT Services Webinar
Despite UK IT services deal volumes remaining resilient, outcomes for MSPs and IT consultancies are becoming increasingly polarised. A small cohort of specialist, high quality businesses continue to attract strong buyer interest and premium valuations, while more traditional and undifferentiated models are finding organic growth harder to sustain than at any point in the last decade.
That was the core backdrop to Moore Kingston Smith’s recent webinar, chaired by Esther Carder, which explored a question many founders and leadership teams are quietly asking themselves:
Is the traditional MSP model still fit for purpose – and what does “investable” really look like today?
Joined by Tom Jones (Head of Corporate Development, Focus Group), Roshan Puri (Partner, YFM Equity Partners), James Paton Philip (Partner and Technology Sector Lead, Hill Dickinson) and Nick Thompson (Head of Corporate Finance, Moore Kingston Smith), the panel unpacked what buyers are now looking for in practice, how deal dynamics are changing, and most importantly, what management teams can do now to strengthen their position, whether that is to accelerate growth, attract investment or prepare for an eventual exit.
The market hasn’t slowed – it has split
Setting the scene, Nick Thompson emphasised that this is not a uniform downturn in IT services M&A, but a market that has become increasingly selective.
Overall deal volumes remain broadly consistent, but demand has diverged sharply by subsector. Cyber security, data led consultancies and clearly defined specialists continue to attract strong interest, while traditional MSPs with broad propositions and limited differentiation are finding growth and exits materially tougher.
A key structural factor has been the rise in interest rates. Businesses that were acquired through leverage heavy buy and build strategies when debt was cheap are now feeling the strain. Those that failed to convert scale into genuine organic EBITDA growth are seeing exits delayed, valuations reset or in some cases restructurings forced.
Crucially, Nick reframed restructuring not as failure, but as a positive reset: an opportunity to strip out financial engineering and refocus on the fundamentals that now drive value – delivery quality, scalable economics, data discipline and a compelling, relevant proposition.
Tom Jones – Buy and build fails without organic growth
From a buyer operator perspective, Tom Jones was unequivocal: when buy and build strategies stall, the root cause is almost always weak organic growth.
Short term EBITDA gains driven by cost cutting or synergies can disguise underlying issues, but only temporarily. Sustainable value is created when revenue and gross profit growth comfortably outpace the cost of capital. Without that, the model eventually runs out of road.
Tom highlighted just how forensic buyer scrutiny has become. Organic growth is no longer assessed at a headline level; billing data is interrogated customer by customer and rebuilt inside buyers’ own operating models to stress test assumptions around churn, pricing, consumption and future margin.
Importantly for sellers, his message on capital availability was reassuring: capital is not scarce, quality is. Businesses that can clearly evidence how they win customers, expand relationships and retain them over time stand out increasingly strongly as competition for high quality assets intensifies.
Roshan Puri – Differentiation now drives returns, not multiple arbitrage
Roshan Puri traced how the private equity investment thesis in MSPs has fundamentally evolved.
What previously worked (recurring revenues, leverage and multiple arbitrage in a fragmented market) has been undermined by higher interest rates and tighter credit conditions. As financial engineering becomes less effective, returns must now be earned the hard way: through organic growth and genuine business quality.
Looking forward, Roshan highlighted three characteristics most likely to command premium outcomes:
• Clear specialism, whether by sector or technology, enabling deeper customer understanding and pricing power
• Embedded cyber and security capability, increasingly correlated with higher valuations
• AI enabled operating models, improving delivery efficiency, pricing discipline and creating new advisory revenue opportunities
Above all, Roshan reminded attendees that investors “buy stories”. The strongest businesses can articulate a clear, repeatable customer journey, from ideal customer profile through onboarding, value creation, cross sell and long term retention. Data supports the investment case, but the narrative still matters.
James Paton Philip – Predictability is the new differentiator
From a legal and risk perspective, James Paton Philip reinforced how significantly due diligence expectations have moved on.
Differentiation is increasingly about predictability: clarity over contracts, delivery risk, cyber resilience and governance. Buyers are no longer satisfied with policies or frameworks on paper; they test how risk is managed in practice, day to day.
Cyber resilience, in particular, has moved from a technical issue to a board level governance priority. Incident readiness, escalation pathways and accountability structures are now being explicitly priced into deals, through valuation adjustments, warranties and indemnities.
James’s advice to founders was clear: de risk early. Strong governance and resilience not only protect value in a transaction process, they also improve how businesses operate long before any exit is contemplated.
The common thread: growth with discipline
Across the panel, one theme recurred consistently: growth alone is no longer enough.
Today’s premium MSPs and IT consultancies combine organic growth with discipline in delivery, pricing, data, governance and customer understanding. Those still relying on scale for scale’s sake, cost cutting or headline market multiples are increasingly leaving value on the table.
As Nick concluded, the most practical step leadership teams can take is deceptively simple: create the space to step back, plan early and challenge whether the business is genuinely exit ready, not just busy.
In a more polarised market, clarity, focus and discipline are no longer optional. They are the new foundations of value.
