Channel M&A is on an upward trajectory, driven by a key trend in particular that's intensifying, according to Knight Corporate Finance Director Paul Billingham.
"Across the market we have seen a downturn in deal activity, but our view is that the quality threshold for completed deals has been higher rather than acquirers pulling out of the market," he said. "While the climate has been challenging over the last 12 months we have still seen good activity."
As well as raising the deal quality bar – rather than a dip in the number of active acquirers – another important factor is behind growing M&A momentum, noted Billingham who cited recent research conducted by Knight Corporate Finance.
"Buy and build is often associated with acquiring a company and slashing costs to increase profit, but our survey says that this is not the case," he explained.
"As the lines across different reseller channels blur, it is important for buyers to be competitive and acquiring new skills has been key in ensuring they can remain relevant to customers."
Billingham noted that Knight has had a good year, having completed 17 deals in the last 12 months. And he says there is a high level of underlying confidence from acquirers in the comms and IT sectors, despite a relatively quiet start to 2025 for M&A.
"A combination of economic uncertainty, interest rates and higher taxation has resulted in a fall in deal volumes with the first quarter of the year recording the lowest number of deals for three years," he added.
"However, our research of over 30 buyers from across the MSP, communications and cloud services sector indicates that confidence remains strong with M&A still high on the agenda."
Research into the acquisition criteria for buyers revealed another telling trend, that building scale remains key with 24 per cent ranking increasing EBITDA as the most important factor.
"However, it is clear that acquiring for growth is proving more important than cost savings with 62 per cent of buyers citing organic growth, securing a position in a vertical market or expertise in a new technology as their main driver for a deal," added Billingham.
"Organic growth is the ultimate key value driver and ensuring teams have the right customer proposition is key to achieving this. It was also interesting and positive to note that 21 per cent of buyers told us that the quality of people was a key driver for making an acquisition.”
The research report went on to show that 77 per cent of the buyers questioned had completed at least one deal in the last year. Ninety three per cent were looking to complete an acquisition over the next 12 months, with 70 per cent seeking to close multiple deals.
Furthermore, 83 per cent had debt facilities and/or sufficient cash to fund their deals. And 86 per cent are actively searching for the right acquisition.
"The remainder showed an intent to acquire but on a more opportunistic basis," added Billingham. “We are talking to buyers, funders and private equity investors on a daily basis and know that there is a strong appetite for M&A.”
Knight Corporate Finance and sister company K3 Advantage are inviting MSP leaders to attend their Financial Sector M&A updates on July 8th, at London or Manchester (as part of UK Partner Week on July 3rd-10th organised by Comms Dealer publisher BPL Business Media).
Find out more and register here -