For the better part of a decade, private equity consolidation and the appeal of predictable recurring cash flows pushed managed services businesses to the center of the IT services M&A market. Recurring revenue became short-hand for value. Project revenue, hardware resale, and systems integration capabilities were treated as secondary. Or worse, as liabilities to explain away.
Many system integrators (SIs) and VAR owners absorbed that message and began entering M&A conversations on the defensive. Now we see this pattern repeatedly: strong businesses undervaluing themselves before a buyer ever weighs in.
The premise deserves a harder look. Sophisticated buyers don't acquire revenue categories. They acquire customer relationships, technical expertise, strategic positioning, market access, and the ability to generate durable future cash flows. Many SIs and VARs possess those characteristics in abundance.
They should stop leading with what they're not.
The most common mistake SI and VAR owners make early in an M&A process is framing their business around its perceived gaps or as something they are not. Opening with "We're not really an MSP" to “In the last few years we transformed from an SI to an MSP” have become common statements. If a company has $20 million in recurring revenue but $90 million in product resell, that company is still an SI.
In addition to recurring revenues, other factors also help determine if a company has successfully transitioned to an MSP: go to market process, sales commission structure, employee profile and mix, and forecast accuracy among them.
The above framing is almost always the wrong starting point. Experienced buyers already understand the differences between MSPs, VARs, integrators, procurement-focused businesses, and hybrid IT providers. Apologizing or those differences signals defensiveness and can make management appear unprepared – even before anyone has asked a hard question.
The better approach is straightforward. Position the business around what it actually does well. Long-standing customer relationships. Embedded infrastructure expertise. Complex solution integration. Vertical specialization. Trusted vendor relationships. Highly technical engineering talent. These are not consolation prizes. For the right buyer, they are the point.
The market has become more discerning, not less. MSP-focused narratives still dominate industry conversation, but buyer perspectives have evolved considerably. Buyers increasingly recognize that not all recurring revenue is equal - and that a mediocre MSP with commoditized offerings and shallow customer relationships can be a significantly worse acquisition than a deeply embedded SI with strong technical capabilities and sticky enterprise accounts.
Several characteristics common in SI and VAR businesses command genuine buyer interest:
• Mission-critical infrastructure expertise that is difficult to replicate
• Relationships in vertical markets (SLED, Federal, Healthcare, etc.) with high switching costs
• Cybersecurity depth and complex integration capabilities
• Procurement and vendor-management expertise at scale
• An installed base that represents a significant future cross-sell opportunity.
A business with deep vertical expertise can carry strategic value that has nothing to do with how its revenue is categorized on a spreadsheet. Product resale revenue tied to trusted advisory relationships and ongoing customer dependency is not commodity revenue. The installed base itself is often a strategic asset, if it's positioned as one.
Cristian Anastasiu
Not One-Size Fits All
Different buyers see different businesses. The strongest M&A outcomes come from owners who understand that buyers evaluate companies through different lenses - and that the right process surfaces the buyers for whom the business is most valuable.
A consolidator focused purely on MSP rollups may undervalue a solutions-oriented SI. A strategic acquirer with an existing managed services practice, a public-sector focus, or a gap in infrastructure capabilities may see the same business as exactly what they need. A private equity-backed platform seeking geographic expansion or vertical diversification may view it differently still.
This is why positioning should never be generic. Depending on the buyer, the same company could be:
• A hybrid IT services platform with embedded recurring revenue opportunity
• A mission-critical solutions provider with a defensible installed base
• A regional infrastructure leader with meaningful cross-sell potential
• A SLED-focused technology partner with structural competitive advantages.
The positioning reflects genuine strategic reality. Getting it right requires understanding the buyer, not just the business. Imperfections don't disqualify - hiding them does.
Many founders feel they need to explain away every perceived weakness before buyers discover it. That instinct, while understandable, usually backfires.
Experienced buyers have seen customer concentration, project-based revenue variability, owner dependency, channel conflict, and transitional periods in almost every deal they've done. The presence of those factors doesn't determine outcome. How management handles them does.
The fact that an SI has choppy and somewhat unpredictable and lower visibility revenues is already factored in the lower valuation it receives compared to an MSP with similar EBITDA but high recurring revenues component.
That doesn't mean the company lacks strategic value - it means the valuation reflects a specific risk profile, not a verdict on the business.
The stronger approach is to acknowledge realities directly, demonstrate awareness, and keep the focus on value creation, customer relationships, and future opportunities. Buyers evaluate businesses holistically. Overexplaining imperfections doesn't minimize them - it draws attention to them.
Preparation is the best protection against retrading. Retrading after exclusivity - a buyer renegotiating price or terms once they have leverage - is one of the most damaging outcomes in an M&A process. It rarely happens because a buyer arbitrarily changes their mind. It happens because something material surfaces during diligence that wasn't addressed upfront.
Quality buyers and QoE providers will scrutinize EBITDA normalization, revenue recognition, recurring revenue quality, revenue cutoff testing, working capital mechanics, gross margin consistency, add-backs, deferred revenue, and forecast credibility. There are no shortcuts in that process.
The most effective philosophy is simple: bad news first. When management teams proactively surface difficult topics early - and frame them clearly - buyers gain confidence in the integrity of the process and in management's judgment. Surprises discovered middiligence create leverage for buyers at exactly the wrong moment.
Process design matters as much as positioning.
There is no universal process structure that produces the best outcome. A targeted process, an auction, a prioritized, staggered approach, or bilateral conversations can each be appropriate depending on shareholder goals, timing constraints, confidentiality concerns, buyer universe, and desired transaction structure.
What the best processes share is not a formula - it's discipline. Create leverage. Maintain options. Negotiate from a position of strength. Keep the process dynamic enough to respond to what buyers actually signal, not what you assumed they'd value.
The Bottom Line: Understand Your Value
Many SI and VAR owners have underestimated what they've built because the industry conversation has been so dominated by MSP multiples and recurring revenue narratives. That framing has distorted self-perception in ways that show up clearly in how these businesses enter M&A conversations.
The companies that achieve the strongest outcomes are rarely those that fit neatly into the prevailing market narrative. They're the ones that understand their own strategic value clearly, position it credibly for the right buyers, and run a process that creates genuine competition for the asset.
In an MSP-obsessed market, that discipline is the real differentiator.
(Excendio Advisors managing partner Cristian Anastasiu has participated in more than 100 transactions involving sellers with revenues in the $5 million to $150 million range in IT Services and Software.)