The mid-market MSP world is on fire in 2025. Transaction volume is high, valuations are volatile, and the “build versus buy” question is on everyone’s mind. Whether you’re a smaller provider evaluating whether you’re an acquisition target, or an independent MSP charting a path forward, understanding M&A dynamics is vital.

The Market Moves: Relentless Deal Activity

In the first half of 2025, the MSP sector recorded 121 deals worth more than US $1 billion, up nearly 25% from the same period last year. (Greenwich GP)

Private equity firms remain the dominant players, favoring “platform-plus-add-on” strategies. The logic is simple: buy a scalable MSP with strong recurring revenue, then bolt on regional or specialized providers to expand reach. These add-on acquisitions — often below $20 million in annual revenue — make up the majority of transactions this year.

Strategic acquirers are also active. Larger MSPs are buying cybersecurity, AI, and compliance capabilities to broaden their value proposition and lock in higher-margin services. In many cases, the target companies are boutique specialists whose expertise fills a strategic gap.

The result? An increasingly consolidated market where the middle tier is thinning out — and agility, specialization, and storytelling now determine whether an MSP thrives or gets absorbed.

What Buyers Really Want

Dealmakers in the MSP space concentrate on the same themes: scale, specialization, and efficiency.

Buyers want MSPs that can grow without chaos — meaning clean books, repeatable delivery models, and standardized tech stacks. Recurring revenue above 70% is now the norm for premium valuations. Operational maturity — the ability to onboard, service, and retain clients predictably — is more valuable than raw size.

At the same time, differentiation drives competition. Healthcare, legal, and finance remain hot verticals because of regulatory complexity and steady demand. Cybersecurity capabilities are essential; cloud and AI expertise are rapidly becoming table stakes. MSPs that can demonstrate automation gains, either through AI-driven service management or self-healing infrastructure, are commanding attention from investors. (Falcon LLC)

For smaller MSPs, that means story matters as much as scale. Buyers are looking for focus — not generalists. A compelling niche, loyal client base, and operational discipline can outweigh size in today’s buy-and-build environment.

The View from the Middle: Pressure and Possibility

For independent and regional MSPs, this surge in M&A can feel like a double-edged sword. On one hand, valuations are strong and exit options abound. On the other, competition from consolidated platforms is fierce — with deeper pockets and broader service catalogs.

Many smaller MSPs are weighing two paths:

• Position for acquisition: Clean up your financials, highlight your vertical expertise, and articulate what makes your firm a valuable bolt-on.
• Commit to independence: Differentiate through specialization and client intimacy. Double down on local relationships, deep technical focus, or unmatched service experience.

Whichever path you choose, clarity is crucial. The middle market is being redefined — and the winners are those who know exactly where they fit.

Integration and challenges post-deal

Acquisition is only half the story — integration often makes or breaks the value. Key observations for smaller MSPs include:

• Cultural fit matters: Platform buyers increasingly emphasize whether the target MSP’s culture, delivery model and client relationships align with the acquirer. IT Solutions
• Operational consolidation: Back-office systems, toolsets, gross margin profiles must align; otherwise synergies are harder to achieve.
• Communication with clients and staff during transition is critical: Even good deals can erode value through client churn if the integration is mishandled.
• For smaller MSPs looking for exit, understanding this part of the playbook gives you visibility into the buyer’s intent and timetable.

Actionable checklist for an MSP today

• Review your key metrics: recurring revenue %, churn rate, profitability by service line.
• Invest in automation and processes that demonstrate scale-readiness.
• Clarify your niche or specialization; buyers value defined differentiation.
• Decide your intent: Are you preparing to be acquired or staying independent? Strategy flows from that.
• Engage advisors or M&A specialists early if acquisition is in your horizon; value-creation isn’t just about revenue today but about the story you can tell.
• For independent growth: partner strategically, consider alliance models, look for adjacent services or geographic expansion rather than competing in a roll-up arms race.

The Bottom Line

This is shaping up to be a defining year for MSP consolidation. The buy-and-build model is dominant, valuations are rewarding high-quality assets, and smaller providers must act with clarity: become attractive for acquisition or differentiate for independence.

From Treaty’s perspective, our MSP clients should view this as an opportunity — a chance to define your path, sharpen your story, and leverage market momentum. Whether your ambition is exit or growth, understanding the dynamics now gives you leverage. 

The consolidation wave isn’t slowing, it’s changing shape. The question is: Will you ride it, be part of it, or be passed by?