The most underreported trend in the channel right now: MSPs are acquiring VARs. Not the reverse. Not PE firms buying both. MSPs, with their recurring revenue models and predictable margins, are using their valuation premium to buy traditional resellers and convert those customer bases to managed services. This is a fundamentally different dynamic than the PE rollup machine that has dominated channel M&A headlines.
This is the consolidation play that actually makes strategic sense. VARs have customer relationships and hardware install bases. MSPs have recurring revenue and operational maturity, though profitability remains a paradox for many. Put them together and you get a services business with a built-in hardware refresh cycle feeding it new managed services opportunities every three to five years.
If you’re a VAR owner doing less than $10M in revenue, your most likely buyer isn’t a PE firm. It’s the MSP down the street who just took their first outside investment and needs to grow their customer count fast. Understanding how the channel makes money helps explain why recurring revenue models carry such a premium. The generalist VAR model is already on its last legs, which makes the timing work for both sides. Start thinking about what your contracts and customer relationships look like from a buyer’s perspective. As security overtakes hardware as the primary revenue driver, the services-first acquirer has even more leverage. That’s the conversation coming your way.