Acquisition Financing 101

GreatAmerica is exploring financing MSP acquisitions in the Channel.  

That statement may come as a surprise to some as GreatAmerica has built a tremendous reputation within the markets we serve as being one of the best equipment financing organizations. One of the 10 GreatAmerica core value principles is, “We continuously enhance value through innovation and improvement,” and the mission of the company is, “we help our customers achieve greater success.” 

Over the past couple of years, the growth of mergers and acquisitions within the Managed Service Provider (MSP) space has grown at such a rapid pace that some would say it is the most talked about subject, even over cybersecurity and artificial intelligence. Even with the high volume of acquisitions, there have been challenges for many MSP owners to find “the right” financing solutions and sources to help facilitate acquisitions. In prior years, many buyers were facilitating transactions without the use of third party funds/financing and while many buyers have available cash, they are understanding the value of utilizing debt leverage to continue to grow their perspective organizations. 

Financial sources for buyers to help facilitate mergers and acquisitions: 

Each transaction and buyer are unique, and every source included may be a good fit depending on certain elements and long-term goals of both the seller and the buyer.  

From a financing perspective, here are some considerations for buyers: 

• Understand timelines as due diligence without involving third party financing could be as long as twelve weeks so start research on what type of financing source makes the most sense for transaction and start conversations earlier in the process. 

• Understand if you will need to have pre-approval during the letter of intent process, as some buyers will require proof prior to signing. 

• Is there anything on your or selling entity’s financials that may require additional work and/or conversations? An example may be existing operating line of credit that has certain covenants or restrictions. 

From a financing perspective, here are some considerations for sellers: 

• Have you spent the time and/or hired a third party to provide a valuation of your organization? 

• Most buyers are going to require a clean balance sheet; is there anything that you need to clean up? 

• A lot of managed service providers facilitate subscription and/or As-A-Service programs on a balance sheet. GreatAmerica has helped many MSPs with the ability to buy existing contracts as well as helping put together financing programs to alleviate this. 

Whether you are a buyer or a seller, there is a lot of information on areas to help educate and prepare yourself for one of the most exciting times during your professional journey. If you are looking for additional information and would like to surround yourself with individuals who are also investing in this area, you can check out IT Nation Grow events here or contact GreatAmerica.