Case Study: $8M IT Managed Services Business

The Buyer

The buyer was a former corporate manager who spent nearly two decades climbing the ranks in a Fortune 500 company. Like many, he reached a point where the appeal of building something of his own outweighed the stability of his corporate job. He wanted a business that was hands-on, delivered real cash flow, and had levers for operational growth. He wasn’t looking for a flashy startup, he wanted a durable business with recurring revenue and a loyal customer base. We worked closely with him to clarify his acquisition criteria, including industry, deal size, required cash flow, location, and level of owner involvement, to make sure every opportunity fit both his financial goals and personal preferences.

Finding the Deal

Unlike many first-time buyers who spend months trolling BizBuySell and other marketplaces, this buyer went off-market from the start. We kicked off a targeted outreach campaign to IT managed service providers in his region, focusing on owners nearing retirement age. After dozens of conversations, we connected with a seller who had built his MSP from the ground up over 25 years. The seller was ready to step back, but wanted to avoid the disruption and time commitment of a public listing. This opened the door to a direct, relationship-driven negotiation, no broker, no competitive bidding war, and a more transparent diligence process.

The Numbers

• Purchase Price: $8,140,000

• EBITDA: $2,218,842

• Revenue: $7,396,140

• EBITDA Margin: 29%

• Multiple Paid: 3.67x EBITDA

This MSP had an unusually high EBITDA margin for the sector, driven by a sticky client base and an efficient, experienced team. Contracts were set up on 12- to 36-month recurring cycles. Equipment was well-maintained, and the business ran smoothly with minimal day-to-day involvement from the seller. This structure gave the buyer confidence that the operation would continue to perform even with a new owner.

How We Structured It

• SBA 7(a) loan: ~80% of purchase price

• Buyer equity: ~20%

• Seller financing: Not required

We lined up a relationship-focused SBA lender familiar with the IT services space. Because the business was capital-light but cash-flow strong, we were able to negotiate favorable loan terms with no seller note and without a personal real estate guarantee, something most lenders require. The loan was structured with a 10-year amortization, keeping monthly debt service well within the target DSCR (debt service coverage ratio) of 1.5x+.

Key Challenges and How We Solved Them

1. Normalizing Seasonal Financials:

The MSP’s revenue had some seasonality, especially around client hardware upgrades and end-of-year projects. We worked with both the seller’s CPA and our buy-side advisor to normalize EBITDA, breaking out one-time or project-based revenue so the lender saw a true picture of recurring cash flow. This prevented last-minute hiccups with underwriting.

2. Key Employee Retention:

During diligence, we learned a senior technician was considering leaving for a competitor. Rather than risk losing him, we helped the buyer structure a retention bonus. A mix of upfront cash and a 12-month bonus tied to performance and tenure. This gave the team stability and reassured clients during the transition.

3. Lease Renewal:

The business lease had less than two years left, a red flag for lenders and buyers alike. We worked with the landlord to negotiate a 5-year renewal at favorable terms before closing. This locked in location stability and gave the buyer room to invest in light renovations and team expansion without the risk of relocation.

Post-Close: The First 90 Days

Our work didn’t stop at closing. In the first three months, we:

• Personally introduced the buyer to every major recurring client, smoothing the ownership transition

• Helped review and renegotiate vendor contracts, saving ~8% on average costs

• Built a custom dashboard for tracking key metrics like labor cost as a percent of revenue, revenue per technician, and client churn

• Set up bi-weekly coaching calls, focusing on leadership, delegation, and proactive problem-solving in the new environment

The Outcome: Building a Platform, Not Just a Job

Three months in, the buyer was running the business rather than being run by it. Revenue ticked up slightly as the team adjusted to new incentives and processes. Morale remained high, client retention held steady, and the buyer freed up time to explore bolt-on acquisitions in adjacent service lines.

Lessons and Takeaways

This acquisition worked because the buyer trusted the process, kept a cool head under pressure, and had experienced help at each step. He didn’t overcomplicate diligence, didn’t get cold feet in negotiations, and focused on post-close execution rather than just getting the deal done. For first-time buyers, a disciplined approach and the right team make all the difference.