After our deep dive with Charlene Ignacio on the Cyber Confidential podcast about Mergers and Acquisitions, it's crystal clear that preparing for M&A isn't just a theoretical exercise – it’s about building a fundamentally stronger business. Charlene was incredibly direct about what buyers, especially PE firms, are looking for. If we're serious about maximizing our value and being M&A-ready, we need to internalize her advice. Here’s a straightforward breakdown of her critical points for us to focus on:
1. Get Real About Profitability & Financials – It's Non-Negotiable.
Buyers Want Profit, Period: Charlene couldn't have been clearer: "First and foremost, they [PE firms] want a profitable business." This isn't just about revenue; it's about healthy, consistent margins.
Clean Up the Books – No Excuses: She mentioned deals stalling for months or collapsing because "the books were horrific." Our financials need to be impeccable, transparent, and audit-ready for at least three years. No shortcuts here.
Understand Your EBITDA: We need to know our "EBITDA...your baseline of what really truly is your revenue," as Charlene put it. This is a core metric buyers will dissect.
Owner Pay vs. Company Profit: Ensure owners are taking a market-rate salary. This clarifies true business profitability.
2. Build a Business That Doesn't Revolve Around One Person.
The Owner Dependency Trap: Charlene warned, "If the business cannot run without you...That's what turns off a PE firm." We must actively work to ensure our operations, client relationships, and strategic decisions aren't solely reliant on one or two individuals.
Scalable Systems & Processes: This means fully leveraging our PSA, documenting everything, and building a team that can execute without constant oversight. Buyers look for a "machine that's gonna continually to print profitability."
3. Focus on What Buyers Actually Value.
Strategic Clientele: Are we serving "industries that are regulated, are gonna be around, and are gonna pay their bills"? Charlene highlighted this as a key interest for PE firms, more so than, say, a "flower shop or the dog groomer shop."
No Client Concentration: Her advice was stark: "You do not want one client to be 30% of your revenue." We need to actively manage this risk and ensure a diversified client base.
Efficiency & Scale Over Emotion: Buyers, especially PE firms, "are not looking at it as an emotional purchase. They're looking at profitability, scale, and then efficiency." Our internal efforts must align with these objective criteria.
Revenue Level Matters for PE: While not the only factor, Charlene mentioned that for PE firms, MSPs in the "$5 to 10,000,000 is that sweet spot" because they often demonstrate more stability and developed processes. If our goal involves PE, this is a consideration for our growth targets.
4. Have a Plan – Don't Wait for a Crisis.
The 18-Month Runway: For a planned sale, Charlene said, "it's about an eighteen month process once that happens [the decision to sell] that they start getting their books in order." This implies proactive, long-term preparation.
Partnership Alignment is Crucial: If there are multiple partners, everyone must be on the same page regarding M&A. Charlene has seen deals fall apart because "the partner's like, I don't want to sell." These conversations need to happen early and honestly.
Business Resiliency as a Standard: Even if M&A isn't an immediate goal, building what Charlene calls "business resiliency" – a strong, independent, well-documented operation – is just good business. It prepares us for anything, including an unexpected M&A opportunity.
5. Don't Neglect Communication & Key Protections.
Retaining Top Talent: "If you had good agreements in place, you're not gonna lose your top talent because that does impact a sale," Charlene advised. This includes clear communication during any M&A process.
Client Service Continuity: During M&A discussions, focus can shift. But, as Charlene warned, "deals fall apart on the eleventh hour where they've lost half of their clients" due to service drops. Our clients' experience must remain paramount.
Consider M&A Insurance: For significant transactions, Charlene mentioned "M&A insurance" as a way to protect against unforeseen liabilities from the acquired company's past.
Key Takeaway from Charlene
Building an M&A-ready MSP is about instilling discipline in our financials, operations, and strategic planning now. It’s not just about a future transaction; it’s about creating a more valuable, efficient, and robust business today.