THE THREE PRIMARY MULTIPLES
EV/EBITDA, EV/Revenue, EV/ARR
Most MSP acquisitions are valued on one of three bases. EV/EBITDA is the dominant framework for profitable, scaled MSPs — $5–20M-revenue MSPs typically trade at roughly 5x to 7x, reaching about 8x where a regulated vertical and a documented security practice are both present. EV/Revenue is used for smaller MSPs or where EBITDA is depressed by founder compensation or investment, typically 0.8x to 2.0x. EV/ARR is used by PE buyers thinking in SaaS terms — 3x to 6x for high-quality recurring books.
Which framework applies depends on size, profile, and buyer category. A $1.1M EBITDA MSP being acquired by an owner-operator is priced on EV/EBITDA at the low end. A $1.4M EBITDA MSP with 85% recurring mix and a documented MDR practice being bought by a PE platform is priced on a blend of EV/EBITDA and EV/ARR — whichever produces the higher number.
THE VALUE DRIVERS
What pushes you up or pulls you down the multiple range
Professional buyers don't price on the headline multiple — they price on the specific operating signals that either support or compress what they're willing to pay. These are the factors that move you from the bottom to the top of the range.
EBITDA NORMALIZATION
The number buyers actually value the business on
Acquirers don't value your reported EBITDA. They value your normalized EBITDA — adjusted to reflect what the business earns under new ownership. Every add-back you claim will be tested in Quality of Earnings. Clean books that clearly support your adjustments are worth more than a higher claimed number the buyer can't verify.
Above-market owner compensation
If you pay yourself $400K in a business that would hire a GM for $150K, the $250K delta is typically added back. Must be documented with payroll records.
One-time expenses
Legal costs from a dispute, a non-recurring capital purchase, pandemic-related costs. Each add-back is supported with the underlying documentation.
Personal expenses through the business
Common and expected in private MSPs — but each one needs an invoice or receipt to survive Quality of Earnings testing.
Non-arm's-length transactions
Related-party rent above market rate, family member payroll, vendor relationships at non-market pricing. Adjusted to market-rate equivalents.
CURRENT EV/EBITDA BENCHMARKS
Multiple ranges by EBITDA tier (2026)
| Business profile | EV / EBITDA | Key driver |
|---|---|---|
| Under $1M EBITDA (below ~$5M revenue) | 3.5x – 5.0x | Size discount; smaller buyer universe; individual and SBA buyers |
| $1M – $1.5M EBITDA ($5–9M revenue) | 5.0x – 7.0x | Core add-on territory; PE-platform and strategic interest |
| $1.5M – $2.5M EBITDA ($9–15M revenue) | 6.0x – 8.0x | Competitive add-on; auction-grade if MDR attach is real |
| + Strong vertical specialization (50%+ regulated) | +0.5x to +1.5x | Premium for healthcare / legal / finserv concentration |
| + Strong MDR/MSSP capability (>30% of MRR) | +0.5x to +1.0x | Most-sought capability among PE platforms |
| - Top customer concentration above 20% | -1.0x to -2.0x | Concentration haircut applied regardless of other factors |
The premiums and haircuts below adjust the base range; in practice the combined result tops out around 8x for this band, and buyers rarely credit both premiums in full. Triangulated from Aventis Advisors, Eight-M, Solganick (Q3 2025), FOCUS Investment Banking, ConnectWise / GP Partners, and internal benchmarks.
MRR QUALITY DEEP-DIVE
The composition of recurring revenue matters more than the headline figure
Two MSPs with the same $4M of annual recurring revenue can be valued very differently. The difference is in the composition — contract length, revenue type, and churn profile. Here's what buyers actually look at when they verify your MRR schedule.
Three-year agreements with auto-renewal and CPI escalators are the gold standard.
Month-to-month managed services agreements are technically 'recurring' but buyers discount them heavily — the customer can leave any month and the revenue isn't really under contract. One-year agreements with auto-renewal and 90-day notice are acceptable. Three-year agreements with auto-renewal, CPI escalators, and a notice provision that protects the seller are the ceiling.
Managed contracts are valued highest; licensing resale is excluded or marked down.
True MRR — recurring fees for delivered managed services — is what the multiple is calculated on. Software resale and licensing revenue is technically recurring but thin-margin and often excluded from the MRR base for multiple purposes. Project, T&M, and break-fix revenue is excluded entirely. Buyers will rebuild your MRR schedule line-by-line during commercial diligence.
Sub-5% gross churn and 100%+ NRR are the platform-grade benchmarks.
Gross revenue churn (customers and revenue lost) measures retention risk. Net revenue retention (expansion minus churn) measures growth quality of the existing base. Best-in-class MSPs run gross churn below 5% annually and NRR above 105%. Churn above 10% gross typically triggers either a meaningful price reduction or an earnout structure tied to retention metrics post-close.
