Key Takeaways

  • The executive leadership at a prominent platform MSP asserts that organizations with proprietary intellectual property consistently command stronger M&A valuations.
  • Acquiring firms are heavily scrutinizing revenue streams, placing higher premiums on owned AI, security, and advisory services over resold platforms like Microsoft Copilot.
  • Industry data confirms that IP-based managed services are driving the majority of revenue growth, heavily outpacing traditional labor-dependent project work.

The president and CEO of General Informatics has spent the last five and a half years navigating nine acquisitions, a pace that establishes the Baton Rouge-based platform MSP firmly in the camp of experienced buyers. During a recent discussion with CRN, the executive described an industry shifting its valuation logic toward ownership of intellectual property. This aligns with broader data pointing to a market where proprietary platforms and automation tools increasingly separate average providers from high-growth competitors, similar to the strategies employed by global integrators like Cognizant and DXC Technology.

Quality revenue is rigorously scrutinized during diligence. It is not simply recurring revenue or a specific percentage of services; it depends on the strategic goals of the acquiring company. A platform MSP may prize revenue tied to a specific vertical or customer demographic. An MSP focused on midmarket clients may view a 250-user profile as attractive, while a provider built around smaller firms takes the opposite view. These nuances frequently dictate deal terms among private equity-backed roll-up platforms.

Gartner projects that by 2026, 80 percent of managed service providers will provide their own software or platforms. That projection reflects a broader effort to protect margins in a market where resale-based revenue models face intense pricing pressure. It also reinforces why owning an internal toolset catches a buyer’s attention during M&A evaluations.

During the CRN interview, it was noted that MSPs frequently stretch their marketing by labeling basic services as strategic advisory work. Sophisticated buyers quickly distinguish between antivirus resale and true advisory services. If a company claims to offer vCISO services but cannot demonstrate executive-level oversight of AI and security strategy, the gap becomes obvious early in diligence. MSPs often attempt to rebrand these services to capture the premium valuations attached to high-touch security and AI consulting.

Forrester research indicates that partners with repeatable, IP-based services grow 50 to 100 percent faster than peers relying mainly on resale and labor-based projects. Additionally, IDC notes that services and IP-based offerings are driving over 60 percent of revenue growth in the broader as-a-service economy. These metrics create tension in the market because most MSPs still lack proprietary platforms, placing firms that develop internal applications in a distinct minority.

The organization has built its own data analytics capabilities, leveraging internal development on platforms like .NET and Azure. While third-party tools remain part of the portfolio, the ability to deploy proprietary IP to selected customers provides a clear differentiator. This operational shift supports the platform MSP model that private equity firms favor, as owned IP allows buyers to standardize operations across acquired firms to drive value creation.

Despite predictions of automated coding tools reducing programming needs, the CEO observed that the company employs more programmers now than it did two years ago. Customers increasingly ask MSPs to work directly with line-of-business applications and databases. This requires an understanding of user interface behavior, integration patterns, and workflows that fall completely outside classic help desk or infrastructure support.

Risk management remains a primary driver for these internal investments. The Verizon DBIR 2024 highlights that 62 percent of system intrusion incidents involve partners or third parties. This exposure explains why MSPs are investing heavily in proprietary security and automation capabilities. It also demonstrates why frameworks like the NIST Cybersecurity Framework and ISO/IEC 27001 appear frequently when structuring IP-based services, as buyers require evidence of robust information security governance.

Post-acquisition integration ultimately determines whether a deal will succeed. General Informatics has become more prescriptive with each transaction, structuring executive leadership so that owner-operators do not necessarily roll into legacy roles. In one recent transaction, the acquired entity's CEO transitioned into the acquiring company's CIO role, filling a strategic operational gap. In other scenarios, cultural alignment frequently supersedes pure revenue metrics.

The approach to deal sourcing has also evolved. Five years ago, the leadership team used consultants who broadcasted broadly to potential sellers. Today, the organization favors a targeted approach. The executive stays connected through roles at The Channel Company’s XChange conferences, mapping out which MSPs are growing and evaluating potential M&A targets through relationship-based sourcing.

Not every provider has the scale or skill set to build proprietary platforms, although AI-assisted development may shift unit economics over time. For now, platform MSPs that own their intellectual property command the immediate attention of private equity investors. As strategic revenue moves toward AI, security, and advisory services, the ability to demonstrate authentic technical depth will heavily dictate M&A valuations across the managed services sector.