How to Sell Your MSP in a Seller’s Market | Reed Goddard

In this episode recorded at IT Nation, Reed Goddard of Evergreen shares how his firm acquires and scales MSPs without integration—and why that model is resonating in today’s seller’s market. He breaks down valuations, AI’s impact on margins, and what founders should consider before selling their MSP.

Key Insights:

Evergreen operates as a decentralized holding company, preserving brand, culture, and leadership while leveraging scale.

Today’s MSP market remains a seller’s market, with typical valuations in the 6–8x adjusted EBITDA range depending on quality and fit.

AI is creating a separation point in the channel—MSPs that automate internally and guide customers through AI adoption will expand margins and enterprise value.
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Transcript

SPEAKER_01 0:03

Welcome to Talk Tech with Rob Scott.

SPEAKER_00 0:07

Hello, welcome to the show. I'm Rob Scott. I'm your host, and today we're on location at IT Nation in Orlando. And joining me now is Reed from Evergreen. Reed, welcome to the show.

SPEAKER_02 0:19

Rob, thanks for thanks for having me.

SPEAKER_00 0:21

Great to be here. Always a pleasure. Yeah. Well, most people in the channel know who Evergreen is. I've got on a big giant shuttle bus and Evergreen's the only other. Yeah, Evergreen's logo was across the the side of it. But for those who are not as familiar with Evergreen, tell us a little bit more about Evergreen and what you guys do.

SPEAKER_02 0:43

Yeah, so happy to. Hopefully, eventually serving even more customers. We like to call it decentralization. So it's tapping into the benefits of scale without kind of sacrificing what makes each MSP special, right? That special sauce, your brand, your people, the way your technicians do business. And then number two is we're never going to sell them. So we're a holding company. Um, our founders were inspired by the great Warren Buffett in in Berkshire Hathaway and felt that there was a place in the cert technology services market to emulate building a hump holding company that just carries on the legacy of technology services businesses for decades.

SPEAKER_00 1:36

Evergreen is the Berkshire Hathaway of the channel, Hun. That's the dream. Yeah. Well that's I don't think you're that far away from it. And for those of the people who don't know, give a sense uh to the audience at the scale at which Evergreen is operating from a from an acquisitions and and growth perspective. Yeah, happy to.

SPEAKER_02 1:56

So from an acquisitions perspective, we'll probably do about 30 MSP deals this year, um, those businesses. And because they're kept independent, right? We have individual CEOs running each and every one. They're they're also growing double digits organically at each operating company, which is super exciting and we're super proud of, right? It's it's a hard channel to grow in, right? It's it's busy, it's competitive. AI is coming into the channel. Um, and so that's generally speaking, I would say the metrics. Thinking about Evergreen broadly, we do invest in two other industries, but our our MSP portfolio crossed, you know, billion dollars of revenue, which we're super excited about. Well, that's probably 115 or so MSPs closed a couple November 1st, which is exciting. Um, but you know, really, really proud of both CNPS, ENPS, um, and just our seller satisfaction, right? We're here to serve our customers, we're here to empower our employees, and we're here to, you know, create legacy with our with our sellers. And so those ultimately are the things we really care about. And, you know, they're they're double the industry average.

SPEAKER_00 2:59

That's fantastic.

SPEAKER_02 3:00

That's something we'd love to continue.

SPEAKER_00 3:01

For those, for those that don't fully appreciate the distinction between integration and distributed, yeah. Why don't you go into a little bit more detail of what it is about integrating that so often fails?

SPEAKER_01 3:17

Yeah.

SPEAKER_00 3:17

And why you chose this different strategy and how it's impacted your your business?

SPEAKER_02 3:23

I think the name of the game is the customers, right? We're trying to, you know, not not change the end customer experience. The goal, hopeful, hopefully make it better, right? Um, you know, if you're ripping out systems, if you know, techno, you know, your technicians are changing, you know, ultimately that's you know, your your customers are are feeling those changes. And so for us, how can someone 2,000 miles apart, you know, 2,000 miles away sitting in an office, understand the local market in Detroit, Michigan, and know how to sell to your customers and know how to interact with your technicians. And so let's take the best about your MSP. Let's take advantage of scale without sacrificing what made it special. And so ultimately, integration boils down to culture, right? You run the culture of Monger, right? Ramsey and Jeff run the culture of Evergreen. Though those are completely different. And to shove them together and try to create a culture out of that can can be really hard, right? It can be done well, right? It can be done thoughtfully, but then you need to figure out, okay, what are you gonna do with those leaders? Are those leaders gonna become a, you know, technical resource? Are they gonna keep leading the business and steering the ship? And and that's where the the problems come up. And ultimately the then customer then feels kind of the fallout of that trickiness to combine the businesses. So that's that's why we have the model we do. And I'm not sitting here and saying integration doesn't work because it does, right? We've seen some great the integruses in the 20s of the world doing it really well. Simply, you know, we feel on a services strategy where we're not gonna sell the businesses, let's set them up and gear them up for decades of success. And we feel that's the best approach to do so.

SPEAKER_00 4:54

That's awesome. I I want you to shift gears a little bit, and I want you to to think about my thousand subscribers on Monger. Yeah. They run it again from 500,000 in revenue to hundreds of millions, you know, PE back companies like yours. Um, what kind of company could be sold to Evergreen? If I'm sitting here thinking, man, one day I'd love to sell my MSP to Evergreen, what does it mean to be um uh a best in class MSP that a company like Evergreen would be interested in buy?

SPEAKER_02 5:31

Yeah, I would say one point to make, and this is gonna vary buyer by buyer, right? Um, you know, our thresholds kind of sit in that three-ish million of revenue range, 500k of adjusted Ubita, right? From there, let's put the mess metrics aside. Okay, right? We're focusing on customer satisfaction. We're focusing on company culture. Is the business growing? Right. Um, we already talked about a little bit, and we've actually gone this whole conversation without saying the magical word AI, right? Um, you know, are they thinking about the inflection point that we're in with in with this industry? Right. Um, and and you know, it's it's about the customers. Are they giving their customers, their end customers, a good experience? Um, and we feel that unless you want to become a part of a huge national brand, um, or your branding is changing, your people are becoming a part of a national organization, we can feel like we can solve to make sellers, customers, and employees happy. And it's, I threw the metrics aside, but it's the classic recurring revenue, right? You know, kind of right-sized, how much is the business earning? Is it the right amount that it should be earning? Are your employees burned out? Do you have too many employees and they're not satisfied because they're not working on tickets that they want to be working on? And so all of those things kind of boil into valuation ultimately that you'll see across across all the different buyers.

SPEAKER_00 6:46

So if I've got a $3 million business with a half a million dollars in adjusted EBITDA, and I decide I want to sell my business, what's the amount of time that you would recommend for them to allow that process to unfold in your experience? It's not like going to trade in a car. It's you know, no.

SPEAKER_02 7:07

What I would say is with sophistic sophisticated buyers, you know, all the ones that you're gonna see at IT Nation, the actual when you're ready to go, you're ready to sign an LOI, an LOI to close, that can be pretty quick. It can be like buying a car, right? Not actually, but call it 45, 60, 75 days. Yeah. But the point from initial conversations to assigned LOI is so crucial. I'm not gonna sit here and tell you to talk to only Evergreen. Talk to everyone out there because we get the question all the time: how can I best prepare myself, my business, and my employees for a potential transaction? It's talking to everyone and it's deciding what do I want for myself? What do I want for my employees, and what do I want for my business? Because there are a multitude of buyers out there that are gonna be solving for different things. And that process can take six months of reflection. It could take a backpacking trip through Europe, it could take three years of conversations with everyone out there, it could take three years of conversations with us or our competitors. That is the time frame that is very, very variable. But when you're ready, um, it's a, you know, it's a pretty quick process. We've done it 120 times. We use the same, we use the same attorneys, we use the same, you know, outsource quality of earning providers, and and we feel we have it down to a science, but it's that kind of dating time that that is really important.

SPEAKER_00 8:23

How would you describe the state of the market for uh managed services where we are today here at the end of 25? I'm not gonna ask you what are the multiples because I know it depends a lot. Yeah. But how would you how would you characterize what you're seeing in the market today?

SPEAKER_02 8:40

No, it's it's a great question. Um I think I I spoke at an event about this recently, and what I did at the beginning of my presentation was like, I had everyone raised their hand if they'd ever gotten an email, call, text, someone knocked on their door, someone showed up to their local bar with interest in buying their MSP. And every- I can tell you uh pretty much everybody raised their hand. And I think that's the state of the market, and we don't expect that to change. Right. It's a seller's market. We saw valuations peak in 2022 as a lot of people were entering the market. They've softened a little bit, but they're still very strong. And we expect them to continue to be strong. Um, and and double clicking on the fact that it's a seller's market, you know, tick us, you know, roll-ups, strategics, MSPs buying each other, merging. Like there's just a lot of activity out there. There's a lot of buyers that's not gonna change. Um, and over the next couple of years, we'll we'll see some of the buyers come to market as well. Um, so it'll be an interesting data point for us and other people in the channel, just for how much are they trading for? How much have they been growing and and how well received will will those platforms ultimately be? And then to your last point on valuation, I will share. We generally pin it to six to eight times, right? Adjusted EBITDA. People can argue adjusted EBITDA. We've paid more, we've paid less, right? It has to do with every single business is different. Um, but we've seen that to be true, you know, throughout our our course of investing in this industry. Expect it to be consistent. Um I actually shared on screen the cash multiples that we've paid since 2017. Um, made sure my boss wasn't in the room first on screen during your presentation. And the whole point being that like trying to bring down the veil and mystique around MA and that like most sophisticated, well-funded buyers are gonna be paying similar multiples. Ultimately, it's how was the dating process and who's the right fit for you? That's the name of the game.

SPEAKER_00 10:32

That's excellent. And you you mentioned the the um AI, you know, in my industry, SaaS, yeah, a lot of founders are confronting this inflection point. And they have decided they don't have the energy or the capability. Yeah, they don't have faith in their team's ability to make the shift, yeah. And they've got too much tech debt. Yeah. And so they're taking advantage of this seller's market to get out while they can, because those people see AI as an existential threat as opposed to an opportunity. Yeah. Do you think that that same thinking will creep into managed services the way I've seen it uh in in SaaS?

SPEAKER_02 11:20

I think that I I mean, uh, our perspective is we're as excited about MSPs today as we were in 2017. We'll do 30 deals this year. I hope we'll do more next year. Um, you know, I think that that speaks to the point that we're as excited about it as ever. I think there's a huge opportunity for MSPs to capture white space revenue. But, you know, to the beginning of our conversation before we we got on here, we're on the precipice of businesses beginning to separate in this industry. The businesses that are automating at their individual business to make their business more efficient, to let their technicians focus on value additive work and beginning to wrap AI to their customer are the ones that are gonna separate themselves. I think multiples are gonna remain the same, but I think the adjusted EBITDA margins of what a business is taking home is gonna change because these businesses can be more efficient, right? You can you can automate monotonous tasks, and so these people are gonna be exiting for more if they have AI in their business into their customers. And the ones that are gonna get left behind and and potentially swallowed by the channels are the ones that that aren't that aren't going to take advantage of this inflection point.

SPEAKER_00 12:31

That's really that's really cool. And in terms of uh Evergreen's thinking as as you move forward into 2026, what are some of your uh key objectives or or results that uh aside from deal count, or there are things that you're you know that you're looking at as success factors for 2026?

SPEAKER_02 12:51

Yeah, I would say um obviously want to have a great year of acquisitions, but you know, maintaining our ENPS, our C NPS, our seller NPS, and and thoughtfully investing in this industry and giving back to this industry and making sure that our businesses are set up for decades of success. I would say 2025, even 2024 was a year of getting rip trying to crack the code on organic growth in our individual businesses. We made huge investments to putting chief growth officers in every single business, right? Someone that wakes up incentivized to think about how I can get new logos in my door, right? That's great. But you also need to take care of your current customers too. And so I think 2026 will be a year of, okay, we've cracked the code on net new. Let's make sure that our customer success is also really cranking and that our customers want to stay with us and they want us to be their technology advisor for this next, this next wave of AI to really capture the opportunity that there is for MSPs for the entire channel. Um, because we always get asked about disruption. I'm sure you get asked about disruption all the time. My personal view, and and I think I have you know colleagues that share the same view, is ultimately MSPs stand between your customer and potential disruption. You know your customer the best, you know what their pain points are, and you have the opportunity to go solve them with AI. Um, so that's that's the that's what I'll leave with you.

SPEAKER_00 14:14

Ladies and gentlemen, there you have it. Reid from Evergreen. Thanks for watching. Appreciate it. Thanks, everyone.

SPEAKER_01 14:21

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