MSP Corp Closes $35M Funding In Aggressive MSP Consolidation Play

‘We’re not a roll-up play. We’re not looking to integrate heavily. We mainly want to make sure MSPs are operating well, provide human resources to them, help them lower overall insurance costs. Companies we acquire are independently run, with their brands and personnel unchanged. We like to think of ourselves as a value-added operator,’ says Ravi Ramharak, MSP Corp co-founder and managing director.

MSP Corp Investments, a company founded to acquire multiple MSPs while letting them continue to operate as stand-alone businesses, last week closed a new $35 million round of funding to help bring more managed service providers into its organization.

The focus of MSP Corp‘s acquisitions to date are Canadian MSPs, and that will continue for the near future, said Ravi Ramharak, co-founder and managing director of the Guelph, Ontario-based company.

However, Ramharak told CRN, the company will expand into the U.S. late next year.

[Related: Selling An MSP Business? Here’s Everything You Should Know]

Ramharak said that while his company is looking to acquire multiple MSPs, it is not looking to roll them up into a single organization like more traditional private equity firms typically do.

“We do light integration,” he said. ”We‘re not a roll-up play. We’re not looking to integrate heavily. We mainly want to make sure MSPs are operating well, provide human resources to them, help them lower overall insurance costs. Companies we acquire are independently run, with their brands and personnel unchanged. We like to think of ourselves as a value-added operator.”

MSP Corp also provides united MSP strength to vendor relationships, along with group buying power to its companies, Ramharak said.

David Papp, MSP Corp chief technology officer, told CRN to think of his company as essentially operators buying other operators.

“We‘re not a private equity firm scooping up other operators,” Papp said.

When most companies make an acquisition and try to integrate it into the larger organization, the acquired company loses its core soul, Ramharak said.

“Private equity companies don‘t understand that,” he said. ”Someone in Ontario might not know what people in Saskatchewan need. It’s important to have boots on the ground and know the local market. If you are successful, why should I come in and tell you what to do?”

MSP Corp is on an aggressive push to make as many MSP acquisitions as possible. The company, which was founded in January of 2020, has already acquired eight MSPs, with a ninth likely to be unveiled sometime this month, Ramharak said.

“This $35-million funding round is our first,” he said. ”We will most likely do a round of capital every year moving forward. Generally, we have been paying $3 million to $5 million per acquisition, and we look to do eight to ten acquisitions per year.”

The market for acquiring MSPs has become super-competitive, Ramharak said.

“There are roughly 10,000 MSPs in North America that could go to market in the next few years,” he said. ”So it‘s not yet a saturated market on the buyer side. Maybe it is saturated in larger cities, but not so much in the more rural areas.”

The typical MSP acquired by MSP Corp has between 10 and 30 employees with EBITDA (earnings before interest, taxes, depreciation, and amortization) of between $500,000 and $ 1 million, which makes them generally on the smaller side, Ramharak said.

MSP Corp provides a unique opportunity to the owners, he said.

“The original owners are all still involved in their companies,” he said. ”No owner in the last two years has left. We really are a family. One reason people sell to us is we provide a comfortable environment for them.”

A lot of MSP owners have an emotional connection to their staff, and are concerned to what happens to them, Papp said.

“But a lot of owner-operators have no exit strategy,” he said. ”They‘ve put in a lot of sweat equity, but have no exit plan. When they hear what we are doing, many are relieved. They can continue to operate in the group. It’s like preparing for retirement for many of them.”

Another unique offering MSP Corp brings to MSPs considering selling their companies is coaching them before getting acquired to help them understand the benefits, Ramharak said.

“We don‘t buy random companies,” he said. ”Some we recruited for 12 months before we acquired them. We showed them the value prop for them and their clients. We are now nurturing eight or nine companies like this.”