03 Aug The Mistake IT Founders Make When Private Equity Calls
IT services M&A is in one of its most active stretches in years. We explain how private equity defines the market, the platform and tuck-in roll-up strategy behind most deals, and how AI is separating premium platforms from commoditized providers. You will also hear which segments are hot, which are cooling, and the exact questions to ask when an investor calls.
Timestamps & Chapters
0:00 – Why private equity keeps calling
1:13 – How we define the IT services market
4:11 – The long tail: ~50,000 firms and three channels
7:03 – Why PE targets IT services: growth and recurring revenue
12:31 – Predictability drives investment
13:48 – Platform and tuck-in roll-up strategy (the math)
16:32 – AI and the services-as-software shift
18:27 – Raising the bar: AI-enabled service delivery
24:06 – Go AI-first or fall behind
26:28 – Hot vs cooling segments (specialize, verticalize, productize)
29:13 – What to do when private equity calls
33:18 – Closing thoughts
Key Takeaways
Predictable Cash Flows: Private equity favors IT services because recurring and repeat revenue make future cash flows highly predictable.
The Roll-Up Strategy: The dominant model relies on buying a platform company around 5–7x EBITDA, scaling via tuck-ins, and exiting near 8–12x.
The New Minimum: Recurring revenue above 50% used to impress investors—today, it is the bare minimum expectation.
Market Temperature:
Hot: Cybersecurity, AI & Machine Learning, regulated cloud, OT/industrial, and vertically focused MSPs.
Cooling: Pure staffing and generalist break-fix providers.
When PE Calls: Prepare beforehand: know your numbers inside out and engage a specialist M&A advisor.
Links & Resources
Blog Post: Read the full article
Valuation Tool: Free Valuation Calculator
Schedule a Consultation: Book a confidential conversation
Podcast: Listen on your favorite podcast platform
Official Website: Revenue Rocket
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.
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