MSP Corp acquires MSPs, lets them maintain their old structure in a model that preserves autonomy, and enables them to use specialized services from each other. Now they are adding more internal services of their own, and plan an expansion into the U.S. in Q2 2002 to add additional specialization.
Ravi Ramharak, Co-Founder and Managing Director Mergers & Acquisitions at MSP Corp
MSP Corp. is a Canadian company whose business model involves buying MSPs and operating them in a loosely integrated union which gives each a great deal of autonomy and lets them share each other’s specializations and expertise. In late September, they took their first founding round, of $35 million, to acquire more companies, and to further develop their solution stack. This will also see them expand into the U.S. in Q2 of 2022.
MSP Corp. strongly emphasizes its differentiation from venture capital firms who have a similar business model.
“We are private operators buying private operators,” said Ravi Ramharak, Co-Founder and Managing Director Mergers & Acquisitions at MSP Corp. “That’s our top pitch. We are all veterans of the industry. We give MSPs a home where they have access to more resources, and an alternative outside private equity.”
“The big difference between being absorbed by a PE firm and our model is that they keep their autonomy,” said David Papp, MSP Corp.’s Chief Technology Officer. “We don’t make them switch things like their accounting or their PSA stack.”
“We think that’s attractive to many MSPs who want to sell today,” Ramharak added. “Retirement for many MSPs now takes the form of derisking as opposed to selling out completely. We can pay the same value as if they sold to a PE, but they can maintain a lot of autonomy.”
MSP Corp. came into existence in 2019, and today they have offices in Guelph Ontario and Edmonton Alberta.
“Jason Dacosta, our co-founder and President, approached me in 2019 and talked about putting together a company that did MSP M&As,” Ramharak said. “I had been in an MSP before that had gone through acquisition, and private equity tore them apart, so I understood the issue. That’s why we keep the acquired companies and their culture as they are. We were formed in 2019 and made our first acquisitions that year.”
The plan is for MSP Corp to go public when they get to about 30 companies, a number that they think provides optimal diversification and protection.
“A large MSP can be at a disadvantage from a risk perspective,” Ramharak stated. “Having 30 separate MSPs at 30 separate locations provides them with an advantage.”
Ramharak also emphasized that unlike PE companies, their model does not involve spinning acquired MSPs back out when they can make a good profit on them.
“They have a house here forever,” he said.
Expansion in Canada has been good, with the company looking at smaller cities of 150,000-250,000 people, where there are many solid MSP companies, rather than just the small number of very large cities who with their suburbs make up about half of Canada’s population.
“There are still some places we are not yet established, like Abbotsford, Kelowna, and Victoria,” Ramharak said. Unlike many Canadian companies based in English Canada, they do have a strong Quebec presence, however. Jason DaCosta, the President, lives in Montreal.
MSP Corp. acts as a buying group for their member MSPs, to provide lower prices on some items. They also offer their own services, with a major emphasis being around HR and Finance, and with more on the way.
“These are services that we developed ourselves,” Ramharak said. “HR recruitment and Finance are the major ones today, although retirement and benefit plans are coming.”
David Papp, MSP Corp.’s Chief Technology Officer
“The biggest trend of all is towards HR services, which have become much more important since COVID hit,” Papp indicated. “There are some huge HR initiatives that we are rolling out, with some great group benefits. MSPs have to deal with the trend of people who want to stay based in lower-cost areas to live. We are also working on programs around vendor relations and other community-oriented things. We have also been fleshing out our tool stack and vendor portfolios.”
Working closely with distributors focused on the MSP market is also part of the model.
“Our general plan is to partner with people like Pax8 as part of their Master MSP program,” Ramharak said.
Looking ahead, driving new synergies with the portfolio is a key goal, which is a principal reason behind the planned U.S. expansion in Q2 of next year.
“We have diversification in our portfolio today,” Papp said. “Rather than going out and dealing with global third parties for things like data centres, we keep it in the family. Our portfolio includes companies which provide these kinds of specialized services.”
“Creating further synergies with the portfolio is critical, and is something we can do through acquisitions,” Ramharak added. “We want to bring cybersecurity into our portfolio, and are currently negotiating to buy an MSSP. Having a full family of services is really the goal. That’s really the master plan.
