By Arnav Kacker, Senior Principal
Executive summary
Managed service providers (MSPs) have become one of the more reliable hunting grounds for private equity, and the fundamentals explain why. The global MSP market is estimated at more than $250B and growing at roughly 10% annually, yet it remains strikingly fragmented, with over 40,000 small providers in the US alone. Add recurring revenue that runs 70% to 90% of the typical book, net revenue retention of 80% to 90%, and a wave of founders nearing retirement, and the case for consolidation writes itself. More than 250 MSP deals have closed across North America and Europe since 2020, and median EBITDA multiples have climbed from 7.8x in 2018 to 14.6x in 2025. For sponsors weighing entry, the question is no longer whether the thesis works but which strategy and which assets win.
A fragmented market built for roll-ups
The structure of the MSP market is what makes it attractive. Tens of thousands of regional and local providers compete on responsiveness and relationships rather than scale, which leaves obvious room for platform standardization. Recurring revenue from long-term contracts, often 70% to 90% of total, gives buyers predictable cash flows, while net revenue retention of 80% to 90% and low churn reward operators who keep service reliable. Demand keeps building underneath all of this: Canalys reported that 40% of SMB workloads were still migrating to the cloud as of 2023, and compliance regimes such as HIPAA, SOC 2, and CMMC continue to pull spend toward outsourced providers. Talent shortages in IT, security, and cloud create wage pressure, but PE-backed platforms can professionalize recruiting and improve technician retention in ways a single-location MSP cannot. Entry multiples of 6x to 12x EV/EBITDA and exits of 10x to 15x or higher reflect that arbitrage.
Security and AI are reshaping the offering
Within the MSP category, security-specialized providers (MSSPs) are the fastest-growing segment, and the spend forecast backs it up: the managed security services market is projected to exceed $80B by 2030 at a 15%-plus CAGR. Cyberattacks, regulatory pressure, and breach costs averaging around $4M per incident have made security the top concern for SMBs and enterprises alike. Providers are responding by building out managed detection and response, 24/7 security operations centers, and compliance support, often co-marketing with vendors such as CrowdStrike or SentinelOne rather than building the technology themselves. AI is the second force. Roughly 70% of SMBs expect to use MSPs to deliver AI use cases, and analysts see AI driving north of 10% revenue growth for MSPs through 2030. Cloud remains the backbone, with more than 90% of companies now using cloud services and cloud spend exceeding half of SMB tech budgets.
How sponsors are playing it
Investors have pursued several distinct strategies. Geographic roll-ups stitch regional players into national platforms, as Alpine Investors did in launching Evergreen Services Group and Apogem did through Logically. Platform add-ons fill capability gaps, illustrated by Ntiva adding UCaaS through NetLogic and Epiphany adding security via CPM Networks. Take-privates target larger businesses with stalled strategies, such as Apollo’s 2016 acquisition of Rackspace. Thrive is the clearest case study: founded in 2000, it completed 17-plus add-ons in six years, built deep financial services and healthcare expertise, and drew strategic investment from Court Square Capital and Berkshire Partners by 2025. Deal flow has held up even through a broader downturn, and 57% of PE respondents expect MSP deal volume to rise on the strength of recurring revenue models.
Implications for private equity investors
The opportunity is real, but the returns increasingly depend on differentiation rather than the existence of the tailwind alone. As consolidation continues, generalist providers competing on price face the most pricing pressure, while those anchored in high-compliance verticals are better insulated. Security is becoming table stakes, so a credible roadmap beyond basic antivirus matters in diligence. Buyers should test how a target acquires customers against a long tail of competitors, how durable its retention is post-integration, and whether it can absorb AI and cloud demand without margin erosion. Customer concentration, technology lag, and integration quality remain the principal downside risks worth pressure-testing before a bid.
Contact us for the full report, which adds detailed competitive segmentation, transaction comparables, the EBITDA multiple trend by half-year, and A/B’s full due diligence question set across market dynamics, growth vectors, competitive positioning, and customer base.