28 Jul 5 M&A Myths That Cost IT Services Founders the Most | Shoot the Moon
In IT services M&A, relying on hearsay about “friend’s deals” and market timing is a strategic risk that lacks critical context. This episode breaks down the five most common myths that lead to unrealistic expectations or missed opportunities, and what the most successful IT services firms do to ensure they are always transaction-ready.
Navigating the sale or recapitalisation of a firm requires separating anecdotal “stories” from market facts. In this episode of Shoot the Moon, Mike Harvath, Ryan Barnett, and Matt Lockhart unpack pervasive industry myths: why a multiple of EBITDA is not a valuation, why the line between Private Equity and strategic buyers has blurred, and how well-structured earnouts act as a “gain share” rather than a penalty. They argue that sustainable, consistent performance is far more attractive to buyers than attempting to “time” a market peak or hit a specific revenue milestone.
Chapters
- 0:00 Cold open and introduction
- 1:00 Why M&A myths need to die: The danger of missing context
- 3:00 Myth #1: “My friend’s company sold for 12x”—The context gap
- 8:30 Myth #2: PE vs. Strategic—Who actually pays more?
- 14:30 Myth #3: Why “Earnouts are bad” is a misconception
- 19:00 Myth #4: Timing the market vs. historical performance
- 26:00 Myth #5: “I’m too small to sell”—The reality of scale
- 31:00 Closing thoughts: Annual valuations and the path to top-quartile performance
In this episode
- Context is everything: Multiples are “stories” unless they include details on growth rates, contract scope, and leadership maturity.
- PE vs. Strategic is a false dichotomy: Both types of buyers have disciplined investment thresholds and look for a clear path to a return on investment.
- Earnouts as “gain share”: When aligned correctly, earnouts incentivise both parties to win together, especially during periods of accelerated growth.
- History beats timing: Buyers normalize peaks and valleys by looking at 3-to-5-year look-back periods rather than just a trailing 12-month outlier year.
- A well-run business always has a buyer: Firms in the top quartile of revenue growth and profit will always find a market, regardless of their size.
Links
- Read more on our blog: https://www.revenuerocket.com/blog/
- What’s your firm worth? Valuation calculator: https://www.revenuerocket.com/valuation-calculator/
- Schedule a confidential conversation: https://www.revenuerocket.com/contact-us/
- Listen to Shoot the Moon on your favourite platform: https://www.revenuerocket.com/podcast/
- More from Revenue Rocket: https://www.revenuerocket.com/
About Revenue Rocket
Revenue Rocket is a sell-side and buy-side M&A advisory firm focused exclusively on IT services companies, including MSPs, cybersecurity, cloud, custom application development, and VARs. For 25+ years we have helped founders grow, position, and sell their firms.
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Thinking about your next move? Schedule a confidential conversation: https://www.revenuerocket.com/contact-us/