Baby boomer owners of Technology Service Providers (TSPs) looking for
an exit strategy made 2021 a record year for TSP mergers and acquisitions, according to the 2022 Annual IT Solution Provider Industry Profitability Report from Connectwise solution and TSP consulting firm Service Leadership Inc.
This, plus acquisitions by Private Equity-funded TSPs and continued organic growth, increased the average size of TSPs, particularly MSPs. Even so, the industry remains dominated by smaller companies, with 82% of TSPs achieving less than $10 million in revenue and 69% less than $5 million in 2021.
Now in its 17th year, the Service Leadership Index highlights rising revenue and profitability for all business models (VARs and MSPs), with revenue up 8.8% and adjusted EBITDA up 13.5% on 2020 levels.
Service Leadership VP Peter Kujawa said: “Despite the pandemic and supply chain issues that ran rampant last year, TSPs did remarkably well financially in 2021. We are seeing this trend continue across TSPs, especially Managed Service Providers (MSPs). MSPs are extremely optimistic in their projections for 2022, budgeting 19% revenue growth in 2022, a 64% increase over budgets in 2021.”