IT MANAGED SERVICES   |   SECTOR BRIEF 

Contracted, recurring ARR meeting an accelerating cybersecurity and cloud consolidation wave 

MARKET TRENDS

• • PE ownership is becoming the default consolidation path: 69% of 169 tracked 2025 MSP transactions were PE-backed, and outside-investor participation in MSP/MSSP deals rose to 80% in Q1 2026 from 68% a year earlier. 

• • Global MSP acquisition volume rose 73% year-over-year in Q1 2026 (64 deals); North American deal volume grew 28% over the same period. 

• • Cybersecurity capability commands a premium: managed security services are growing near an 11.5% CAGR, and cyber-heavy platform exits have reached roughly 20x EBITDA versus low-teens multiples for generalist MSPs. 

GREATER AUSTIN & TEXAS MARKET LENS 

• • Austin and Dallas both rank among CBRE’s top U.S. tech-talent markets, and Professional, Scientific & Technical Services is Austin’s single largest employment sector (109,189 workers), the deepest concentration of any industry in the metro. 

• • Public MSP directories (Clutch, CloudTango) each list 20+ established providers actively serving Austin, consistent with the fragmented, still-consolidating structure seen nationally. 

• • Continued corporate relocations and startup formation along the Austin-San Antonio corridor, within a state that ranks among the nation’s top tech hubs, sustain a steady pipeline of new SMB IT-outsourcing demand. 

Metro-level deal and business-count data are not published for this sector by KPMG, Deloitte, or national trackers; figures above reflect Austin-area and Texas statewide sources, cited below. 

INVESTMENT HIGHLIGHTS

• • Contracted, multi-year recurring revenue (ARR) creates predictable, sticky cash flow. 

• • Asset-light and highly scalable: service delivery expands through tuck-in acquisitions without proportional fixed-cost growth. 

• • Deeply fragmented U.S. market with thousands of sub-$5M shops still independently owned, extending the roll-up runway. 

ACQUISITION TARGET PROFILE

• • Founder-owned MSPs with $500K–$3M EBITDA and $5M–$25M revenue 

• • 70%+ recurring/contracted revenue with 90%+ client retention 

• • At least one specialty capability (cybersecurity, cloud, compliance/vCIO) 

• • Diversified client base, documented processes, and a management layer beyond the founder 

Sources: Drake Star Q3 2025 MSP M&A Report; Omdia (via ChannelDive); Market.us Managed Services Market Report; Data USA; CBRE Tech Talent rankings; Clutch.co / CloudTango Austin MSP directories. 

WHY IT MANAGED SERVICES REVENUE IS SO DEFENSIBLE

Recurring revenue is good. Contracted, multi-year recurring revenue with 90%-plus client retention is better; and that’s the baseline for a well-run IT managed services firm. Once an MSP owns a client’s infrastructure, security stack, and help desk, switching costs do the retention work: ripping out a managed services provider means retraining staff, migrating systems, and accepting downtime risk that no CFO volunteers for. The result is ARR that behaves like an annuity, which is why 80% of MSP transactions in early 2026 involved private equity or outside capital.

Cybersecurity has added a premium layer to the thesis. Managed security services are growing around 11.5% annually, and cyber-capable platforms have exited near 20x EBITDA; roughly double the multiple of generalist shops. With thousands of sub-$5M IT managed services firms still independently owned, the roll-up runway is long, but the scarcest assets are the ones with real security practices, documented processes, and a management layer beyond the founder. Those are the platforms worth paying for, and the ones we look for.

GROWING AN IT MANAGED SERVICES PLATFORM THE RIGHT WAY

Consolidation done poorly destroys exactly what made the acquired firms valuable: responsiveness, relationships, and technical talent. Our approach to IT managed services; spelled out in our investment criteria — is to buy strong regional operators and give them room to grow: capital for tuck-in acquisitions, support building vCIO and compliance practices, and a mandate to keep the engineers who keep clients happy. If you run or represent a founder-owned MSP doing $5M–$25M in revenue with 70%-plus recurring revenue, we should talk.