Managed IT Services Provider, Greater Manchester

Persona	Q	P	I	Verdict	Key Argument
Financial Analyst	5	7	6	Investigate	Viable at GBP 60-75k; debate sharpened bid downward from GBP 85-95k
Operations Expert	4	7	5	Investigate	Three conditions must confirm in first broker call or pass
AI Engineer	6	7	5	Investigate	Strong automation thesis (45-50% labor reduction) on weak current asset
Risk Manager	5	7	5	Investigate	Sound enough to call, not to buy without EBITDA clarity
Search Fund Veteran	5	7	5	Investigate	Good bones with real repricing upside, conditional on seller transition

A 40-year-old managed IT services provider in Greater Manchester serving ~100 micro-SME clients on monthly and annual contracts. GBP 155k turnover, GBP 29k adjusted EBITDA (18.7% margin). Two directors (ages ~70 and ~72) retiring simultaneously — genuine succession sale with no employees. Average revenue per client is GBP 129/month, significantly below current Manchester MSP market rates of GBP 300-500/month for equivalent services. The business is relocatable and operates from leasehold premises.

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Pre-Automation (As-Acquired) — Assuming Scenario C EBITDA

Line Item	Year 0 (current)	Notes
Revenue	GBP 155,000	Stated
Direct costs (hardware, licensing)	(GBP 22,000)	~14% — service-heavy MSP
Gross profit	GBP 133,000	86% GP margin
Coordinator/manager hire	(GBP 38,000)	Manchester-based, replaces both owners
Sub-contractor (on-site visits)	(GBP 12,000)	~GBP 250/day, 4-6 days/month
Premises (lease)	(GBP 12,000)	Small commercial unit, GM rates
IT tools (RMM, PSA, security)	(GBP 15,000)	Standard MSP platform costs
Vehicle/travel	(GBP 6,000)	Reduced vs current (sub handles on-site)
Insurance, telecoms, misc	(GBP 6,000)	Estimate
Accountancy	(GBP 4,000)	Estimate
EBITDA (passive buyer)	GBP 18,000	11.6% margin
EBITDA (self-operating buyer)	GBP 56,000	36% margin (no coordinator)

Post-Automation + Repricing — Year 3

Line Item	Year 3	Notes
Revenue	GBP 210,000	30% of clients repriced from GBP 129→GBP 275/month (+GBP 52k); 15% attrition (-GBP 23k); organic +GBP 26k
Direct costs	(GBP 25,000)	Slightly higher with more clients
Gross profit	GBP 185,000	88% GP margin
Coordinator (with AI tools)	(GBP 40,000)	Same person, AI-augmented
Sub-contractor (reduced)	(GBP 8,000)	Automation reduces call volume ~30%
AI tooling costs	(GBP 5,000)	Custom-built, API costs only
Premises	(GBP 8,000)	Downsize or go virtual
Other overhead	(GBP 18,000)	RMM + PSA + insurance + misc
EBITDA (passive buyer)	GBP 106,000	50% margin

Returns at GBP 65k Purchase Price (All-Equity)

Metric	Value
Year 0 passive EBITDA	GBP 18,000
Year 0 cash-on-cash (passive)	28%
Year 3 passive EBITDA	GBP 106,000
Year 3 cash-on-cash	163%
Payback period	~2.8 years (passive)
5-year cumulative FCF	~GBP 350,000
Exit value (3x EBITDA on GBP 106k)	GBP 318,000
Total return (cash + exit)	~GBP 668,000
Multiple on equity	10.3x
5-year IRR	~60%

Sensitivity: 30% Client Attrition + No Repricing

Metric	Value
Year 1 revenue	GBP 108,500
Year 1 passive EBITDA	(GBP 14,500) — negative
Survivable?	Yes, if self-operating (EBITDA ~GBP 23k)
Recovery	12-18 months with repricing + new clients
Capital at risk	GBP 65k purchase + GBP 15-20k working capital

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Month 1-2: Infrastructure (Pre-AI)

•Deploy Atera or NinjaRMM across all 100 clients (GBP 89-149/month; 2-4 weeks scripted rollout)
•Set up PSA/ticketing (Halo PSA or Freshdesk — replace email inbox)
•Document all client environments (IT Glue or Hudu — GBP 30/month)
•Begin SOP documentation with sellers during transition
•Cost: GBP 3-5k setup | Savings: None yet | Builder time: 20-30 hours

Month 3-4: Quick Wins

•AI-powered alert triage (suppress noise, auto-resolve known issues via Claude API + custom rules)
•Automated patch reporting (weekly client reports generated from RMM data)
•Email/ticket categorization and routing (custom LLM pipeline)
•Cost: GBP 200-400/month API | Savings: 8-10 hrs/week coordinator time | Builder time: 15-20 hours

Month 5-8: Core Automation

•L1 ticket auto-resolution (password resets, printer issues, M365 license management)
•Proactive monitoring dashboards for clients (auto-generated, reduces inbound calls)
•Client onboarding automation (new user setup, security baseline deployment)
•Automated backup verification and reporting
•Cost: GBP 300-500/month | Savings: 12-15 hrs/week | Builder time: 30-40 hours

Month 9-12: Scale

•Self-service client portal (status checks, common requests)
•Repricing automation (new service tier packaging, automated billing)
•Capacity for 130-150 clients with same coordinator
•Begin organic growth or bolt-on acquisition of second client book
•Savings: 15-20 hrs/week total vs pre-automation baseline

Automation Summary

Metric	Value
Automatable labor (remote tasks)	60%
On-site work (irreducible)	20-25% of current labor
Net total labor reduction	45-50%
Annual savings (coordinator time freed)	GBP 15-20k equivalent
Annual AI tooling cost	GBP 4-6k (mostly custom-built)
Time to first AI wins	Month 3-4
Time to full optimization	Month 9-12

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Recommended: All-Equity at GBP 60-75k

Component	Amount	Notes
Purchase price	GBP 65,000	Target bid — 3.8x adjusted EBITDA
Transaction costs	GBP 8,000-12,000	Solicitor + accountant DD
Working capital reserve	GBP 15,000	3 months of coordinator + sub costs
AI tooling setup	GBP 5,000	RMM migration + custom builds
Total deployment	GBP 93,000-97,000	47-49% of GBP 200k equity
Equity retained	GBP 103,000-107,000	Substantial reserve for contingencies

Key Terms to Negotiate

Price: GBP 60-75k — anchored to 3.5-4x the GBP 17k passive-buyer EBITDA midpoint
6-month seller transition (non-negotiable) — contractual consultancy agreement, min 10hrs/week for 3 months then 5hrs/week for 3 months. Without this → Pass.
Earn-out on client retention — 15-20% of price deferred, tied to 12-month client retention >80%
Share purchase — preserves contracts, HMRC agent codes, avoids novation risk
12-month non-compete — standard, prevents sellers from starting a competing MSP
Client introduction schedule — sellers introduce buyer to all top-20 clients by revenue in first 8 weeks

Walk-Away Price

GBP 90,000. Above this, passive-buyer returns fall below 15% cash-on-cash Year 0, and the deal requires aggressive repricing to work. At GBP 90k+, there are better deals in the pipeline (A2 West Somerset, O3 Payroll).

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Risk	Likelihood	Impact	Severity	Mitigation
EBITDA is pre-replacement (Scenario B) — passive buyer gets negative EBITDA	Medium (30%)	Critical	High	First broker call question. If confirmed → Pass immediately
>25% client attrition in Year 1 (ownership change + repricing)	Medium (35%)	High	High	Earn-out tied to retention; staggered repricing over 12 months; seller introductions
Both owners exit without adequate transition	Low-Med (20%)	Critical	High	6-month transition as contractual purchase condition. No transition → no deal
On-site visit frequency higher than estimated (>8 days/month)	Medium (30%)	Medium	Medium	Confirm in DD; budget sub-contractor at GBP 15k/year not GBP 10k
Legacy tech stack (no RMM/PSA) requires full migration	Medium (40%)	Medium	Medium	Budget GBP 5k and 6 weeks for migration; delays AI wins to Month 5
Coordinator hire fails or leaves in Year 1	Low (15%)	High	Medium	Hire during seller transition period; overlap for knowledge transfer; backup sub list
Repricing triggers accelerated churn (>30% loss)	Low-Med (25%)	High	Medium	Stagger repricing; start with newest clients; bundle with improved service (AI monitoring)
Clients on informal arrangements (no written contracts)	Medium (35%)	Medium	Medium	Confirm contract coverage in DD; formalize during transition
Market pressure from larger MSPs targeting micro-SME segment	Low (10%)	Medium	Low	AI-enabled service quality matches larger competitors at lower cost
Cybersecurity compliance requirements (Cyber Essentials)	Low (15%)	Low	Low	Add CE certification post-acquisition; positions for government-adjacent clients

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Pre-DD: First Broker Call (Gate — Resolve Before Proceeding)

☐EBITDA basis: What does "adjusted" mean? Pre or post owner salaries? What do both owners draw (salary + dividends)?
☐Staff: Any employees beyond the two directors? Any part-time/casual help?
☐Tech stack: What RMM, PSA, and security tools are in use?
☐Transition: Are sellers willing to do 6-month transition? If no → Pass
☐On-site frequency: How many on-site visits per week across the client base?
☐Revenue mix: What % is monthly recurring vs annual contract vs ad-hoc/break-fix?

Financial DD

☐3 years management accounts (YE23, YE24, YE25)
☐Revenue trend — flat, growing, or declining?
☐Director loan accounts and related-party transactions
☐Client revenue breakdown — any client >5% of revenue?
☐Debtor aging and bad debt history
☐Working capital requirements
☐Tax returns and HMRC correspondence — any open enquiries?
☐Contract pricing analysis — how many clients on legacy vs current rates?

Legal DD

☐Articles of association, shareholder agreement
☐Client contracts — written contracts for all 100? Change-of-control clauses?
☐Leasehold terms — rent, break clause, lease expiry
☐IP ownership (if any proprietary tools or documentation)
☐Litigation — current, pending, or threatened
☐Insurance policies — PI, cyber, employer's liability

Employment DD

☐Confirm no employees (TUPE not applicable if truly owner-only)
☐Any subcontractor arrangements currently in place?
☐Director service contracts — terms, notice periods

Commercial DD

☐Client retention rates (last 3 years)
☐Client contract terms — notice periods, auto-renewal
☐Service level commitments (SLAs)
☐Competitor landscape — any recent approaches to clients?
☐Online reputation (Google reviews, Trustpilot)
☐Microsoft partner status or vendor certifications

IT/Systems DD

☐Full technology audit — RMM, PSA, security, backup, documentation
☐Client environment inventory — how many endpoints, servers, networks managed?
☐Licensing audit — are all software licenses compliant and transferable?
☐Data protection — ICO registration, GDPR compliance
☐Any Cyber Essentials or ISO 27001 certification?

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Business	Turnover	EBITDA	Multiple	Status	Notes
M1 (B2B IT Support, South England)	GBP 580k	>GBP 100k	3.45x EBITDA	SOLD STC	Apple-specialist MSP, sold before assessment
AcquireBS REF.1526 (UK Midlands MSP)	GBP 675k	—	—	SOLD	35 years established
ECS Solutions (Chester)	~GBP 700k	—	—	Acquired by Flotek	Founded 1985, North West
M3 (this listing)	GBP 155k	GBP 29k	Target: 3.5-4x	Active	Structurally different: micro-scale, individual buyer

Key pattern: All comparable MSP transactions are 3-5x this business's revenue. At GBP 155k, M3 is structurally below the roll-up/strategic buyer threshold. This is an individual-buyer deal, which means less competition but also fewer exit options until revenue scales above GBP 300k.

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What They Agreed On

•P=7 unanimous — "offers invited" with motivated retirement sellers creates buyer-favorable pricing dynamics
•EBITDA ambiguity is the single gating question — must be resolved in the first broker call before any further investment of time
•6-month seller transition is non-negotiable — without it, the dual-owner exit creates an unrecoverable Day 1 void
•Repricing is the deal thesis — not optional upside, but load-bearing for returns
•Verdict: Investigate — worth a broker call, not worth an offer without answers

What They Disagreed On

•Q score (4-6 range): Ops held Q=4 (owner dependency, no staff, no growth), Engineer held Q=6 (task profile is highly automatable). Resolved: the disagreement is methodological — Q=4-5 for the asset as-is, Q=6 for the automation potential of the work. Both are defensible from different angles.
•On-site visits: Engineer initially underestimated (2-4 days/month), Ops flagged higher frequency likely for micro-SME clients with physical hardware. Resolved: subcontracting is viable at GBP 10-15k/year, but compresses thin margins. Automation reduces but doesn't eliminate.
•Repricing as "free call option" vs "load-bearing": Analyst initially framed repricing as optional upside. Veteran reframed: sub-contractor costs compress EBITDA to GBP 14-19k, making repricing necessary for adequate returns. Analyst accepted and revised bid target downward from GBP 85-95k to GBP 60-75k.

How Debate Improved the Assessment

•Bid target sharpened from GBP 85-95k → GBP 60-75k (Analyst revised after sub-contractor cost debate)
•I scores converged from 4-6 range → 5-6 (Ops up, Engineer/Veteran down — met in the middle)
•Risk double-counting eliminated — Risk Manager separated EBITDA ambiguity (P dimension) from structural quality (Q dimension)
•Automation timeline realistic — Engineer conceded 45-50% total labor reduction, not 60%, due to irreducible on-site work

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Investigate — Make the Broker Call

This is a structurally sound 40-year retirement sale with real repricing upside, priced at a level the buyer can control. The debate sharpened the target bid to GBP 60-75k (down from initial GBP 85-95k) after accounting for sub-contractor costs that compress passive-buyer EBITDA to GBP 14-19k.

Specific Next Action

Call the BFS broker and ask these 6 questions (in order):

What does "adjusted EBITDA of GBP 29k" mean — pre or post owner replacement cost?
What do both directors currently draw in salary and dividends combined?
Are there any employees other than the two directors?
What RMM/PSA/ticketing system does the business use?
Are the sellers willing to do a 6-month transition/consultancy period?
How many on-site client visits happen per week on average?

Decision Tree After Broker Call

•EBITDA is Scenario B (pre-replacement) AND no transition offered → Pass
•EBITDA is Scenario C (post-replacement) AND 6-month transition confirmed → Proceed to offer at GBP 60-75k
•EBITDA is Scenario C BUT no transition → Pass (per Veteran: dual exit without transition is unrecoverable)
•EBITDA is ambiguous but transition confirmed → Request management accounts to clarify before offering

Why Not Pass Now?

At GBP 60-75k all-equity, this deploys <50% of the buyer's capital into a learning acquisition with capped downside. The repricing opportunity (GBP 129/month → GBP 250-300/month) is a genuine value-creation lever that doesn't exist in most sub-GBP 100k deals. One phone call resolves the gating question. The cost of making that call is 30 minutes. The cost of not making it is potentially missing a clean first acquisition at a price the market won't compete for.

Priority Relative to Pipeline

M3 ranks below the top 3 pipeline candidates (O3 Payroll, M1 MSP — sold, A2 West Somerset) but is worth the broker call in parallel. If the EBITDA and transition answers are favorable, it becomes a viable "first acquisition to learn on" while pursuing larger targets.

Gate Questions

?EBITDA basis: What does "adjusted" mean? Pre or post owner salaries? What do both owners draw (salary + dividends)?
?Staff: Any employees beyond the two directors? Any part-time/casual help?
?Tech stack: What RMM, PSA, and security tools are in use?
?Transition: Are sellers willing to do 6-month transition? If no → Pass
?On-site frequency: How many on-site visits per week across the client base?
?Revenue mix: What % is monthly recurring vs annual contract vs ad-hoc/break-fix?
?What does "adjusted EBITDA of GBP 29k" mean — pre or post owner replacement cost?

Next Action

Investigate — Make the Broker Call