# How to Buy an MSP or IT Services Business With No Money Down

Source: https://apply.grosfjeld-li.com/guides/buy-an-msp-it-services-business · By Josh Li, G&L M&A Advisory · Updated 2026-10-14

**Short answer:** Buying an MSP with no money down means acquiring a managed service provider’s monthly support agreements, technicians and tooling using commercial debt secured on the business, seller finance paid from its recurring revenue, and seller rollover where the founder keeps a minority stake. Monthly recurring revenue makes MSPs bankable, while founder-held technical knowledge is managed with a handover period.

**Key points:**
- The asset is monthly recurring revenue (MRR) from managed services agreements, not hardware sales.
- Separate MRR from licence resale and project work before valuing anything.
- Founder dependence, undocumented client environments and cyber liability are the key risks.
- Tool consolidation and a shared helpdesk create immediate margin.
- The 70/20/10 structure fits MSPs with strong contracted MRR.

## What do you buy when you buy an MSP?

A managed service provider (MSP) supports clients' IT for a fixed monthly fee. When you buy one, you acquire:

- **Managed services agreements.** Per-user or per-device monthly contracts covering helpdesk, monitoring, patching, backup and security. This is the **monthly recurring revenue (MRR)** that drives value.
- **Licence resale.** Software subscriptions resold to clients. Recurring, but at a thin margin.
- **Project work.** Migrations, hardware refreshes and network installs. Lumpy, but it often follows MRR clients.
- **Technicians and engineers.** Their certifications, client knowledge and on-call roster.
- **The tool stack.** Remote monitoring and management (RMM), professional services automation (PSA), documentation and security tools.
- **Documentation.** Passwords, network diagrams and runbooks for every client environment, if they exist.
- **Vendor partnerships.** Partner status with major software and hardware vendors.

## What makes a good MSP to acquire?

| Feature | Strong target | Weak target |
|---|---|---|
| Revenue | Most gross profit from managed services MRR | Most revenue from hardware and one-off projects |
| Contracts | Fixed terms with notice periods | Handshake or month-to-month with no terms |
| Stack | Standardised tools and client setups | Every client configured differently |
| Knowledge | Documented environments; senior tech handles escalations | Founder is the only one who knows the firewall rules |
| Clients | Close to yours geographically or in your vertical | Scattered, with a few clients you'd never take on |

Often the best target is the MSP with clients next to yours, because on-site visits and after-hours cover then cost almost nothing extra.

## What are the due diligence risks in an IT services business?

Add these to the general [due diligence red flags](https://apply.grosfjeld-li.com/guides/due-diligence-red-flags):

1. **True MRR.** Split revenue into managed services, licence resale, projects and hardware. Only the first is strongly recurring at a good margin.
2. **Contract terms.** Check term, notice period and whether clients can terminate on a change of control.
3. **Founder dependence.** If the founder is the escalation engineer and the main relationship, plan a long handover.
4. **Undocumented environments.** Missing documentation turns every incident into a crisis after settlement. Audit a sample of clients.
5. **Cyber liability.** A breach in a client environment can create claims. Review incidents, security practices and cyber insurance.
6. **Tool licences.** Some tool contracts cannot be assigned, or have long terms. Price in the cost of migrating clients to your stack.
7. **Vendor programme dependency.** Changes to a vendor's partner margins can move profit overnight.

## Why do MSP owners sell?

The founder of a small MSP has usually been on call for years. Every outage, ransomware scare and 6am server failure lands on them. Security expectations keep rising, and clients now expect services such as compliance reporting that a small team struggles to deliver. Many founders also hit a ceiling where growing further means hiring managers they don't want to manage. Selling to a nearby MSP gives their clients better coverage and their technicians a career path.

## How do the no-money-down structures fit an MSP?

Funding combines senior (commercial) debt, seller finance and seller rollover:

- **[70/20/10](https://apply.grosfjeld-li.com/guides/70-20-10-deal-structure)** suits MSPs with strong contracted MRR. Lenders are often comfortable lending against recurring managed services revenue. The 20% seller note covers the transition period, and the 10% rollover keeps the founder helping with migrations.
- **60/40** suits founder-heavy MSPs. A 40% [seller rollover](https://apply.grosfjeld-li.com/guides/seller-rollover-explained) means the founder shares in the result of a smooth tool migration and client handover.
- **100% vendor finance** fits small MSPs whose founder wants out of on-call life and mainly wants their clients and techs looked after.

Deals are structured at a [DSCR](https://apply.grosfjeld-li.com/guides/dscr-explained) of around 1.5x. If a few clients leave during migration, repayments are still covered.

## What synergies come from buying a competing MSP?

- **Tool consolidation.** Two RMM, PSA and security stacks become one. Licence savings are immediate.
- **One helpdesk and network operations centre.** Tickets from both client bases route to one team, with better after-hours coverage.
- **On-site density.** More clients in the same area means fewer kilometres per site visit.
- **Security upsell.** Your security and compliance services can be offered to the acquired clients.
- **Specialisation.** Two generalist teams can split into deeper specialists.

## Illustrative example: a $2M MSP acquisition

*Illustrative only.* An MSP with $4M in revenue buys a neighbouring MSP for $2M. The target has $1.6M in revenue, most of its gross profit from managed services, and earns $650k a year before owner wages and debt.

| Part | Amount | How it's paid |
|---|---|---|
| Commercial debt (70%) | $1.4M | Lender, secured on business assets |
| Seller finance (20%) | $400k | Paid to the founder over four years |
| Seller rollover (10%) | $200k | Founder keeps a 10% stake |

The founder stays for nine months to lead the tool migration and introduce clients. The lender adds a working-capital line, so the deal is [over-financed](https://apply.grosfjeld-li.com/guides/over-financed-acquisition): migration costs are funded without the buyer's cash. Removing the duplicate tool stack and merging helpdesks then lifts margin above the target's standalone profit.

> This guide is general information, not financial, legal or tax advice.

If you run an established IT services business doing $1M+ in revenue and want a signed LOI within 90 days, [see if you qualify](https://apply.grosfjeld-li.com/it-services) for an acquisition strategy call.

## FAQ

### How are MSPs valued?

Buyers commonly focus on recurring managed services revenue and its margin, then adjust for contract terms, client concentration, documentation and founder dependence. Hardware and one-off projects usually count for much less.

### What is MRR in an IT services business?

MRR, or monthly recurring revenue, is the income from contracts billed every month, such as per-user managed services fees. It is the main driver of an MSP’s value.

### Should licence resale count as recurring revenue?

It recurs, but margins are thin and vendors can change terms, so buyers usually value it well below managed services revenue.

### How long should the founder stay after selling an MSP?

Often six to twelve months, long enough to hand over client relationships and support the tool migration. A rollover stake keeps them motivated.

### What is the biggest risk when buying an MSP?

Undocumented client environments combined with a founder who holds all the knowledge. A cyber incident during handover is the worst-case version of that risk.

### Can I buy an MSP with seller finance?

Yes. Founders are often willing to be paid partly over time from the MSP’s recurring revenue, usually alongside commercial debt and a seller rollover stake.