EMPIST Acquires Common Sense Solutions: Turnaround Play

The Deal

EMPIST announced the acquisition of Common Sense Solutions on July 1, 2024, marking a strategic expansion for the 25-year-old managed IT services provider. The transaction brings together EMPIST's established platform with a 33-employee MSP that has been experiencing recent revenue challenges.

Common Sense Solutions represents a classic turnaround opportunity in the MSP space - a business with established infrastructure and client relationships but facing operational headwinds. EMPIST's quarter-century of experience positions the acquirer to potentially stabilize and grow the target's operations through improved processes, technology investments, and management expertise.

Deal terms remain undisclosed, which is typical for transactions involving distressed or underperforming assets where buyers often negotiate favorable valuations in exchange for taking on operational risk.

Strategic Logic

This acquisition fits EMPIST's growth strategy by adding immediate scale through Common Sense Solutions' existing client base and technical talent. The 33-employee workforce provides EMPIST with additional service capacity and potentially specialized skills that complement their existing capabilities.

The timing suggests EMPIST identified an opportunity to acquire assets at an attractive valuation while the target faced revenue pressures. Key strategic fit factors likely include:

• Immediate access to Common Sense Solutions' recurring revenue contracts
• Integration of technical staff to support EMPIST's growth initiatives
• Potential geographic expansion into Common Sense Solutions' service areas
• Opportunity to apply EMPIST's operational expertise to improve target performance

For a 25-year industry veteran like EMPIST, acquiring a struggling competitor allows them to leverage their established processes, vendor relationships, and management systems to drive operational improvements that smaller MSPs often cannot achieve independently.

Valuation Context

This transaction reflects the bifurcated MSP M&A market where healthy, growing businesses command premium valuations while underperforming assets trade at significant discounts. MSPs experiencing revenue decline typically see valuations compress to asset-based levels rather than the earnings multiples applied to thriving businesses.

Current market conditions show strong MSPs trading at 8-12x EBITDA multiples, while distressed situations often transact closer to 1-3x revenue multiples or asset values. The undisclosed nature of this deal's terms suggests EMPIST likely negotiated favorable pricing given Common Sense Solutions' operational challenges.

Strategic buyers like EMPIST often view distressed MSP acquisitions as opportunities to acquire recurring revenue streams, technical talent, and client relationships at discounts to replacement cost. The key risk lies in client retention during the transition and the acquirer's ability to stabilize operations quickly enough to justify the investment.

What MSP Owners Should Know

1. Revenue trends directly impact exit valuations: Common Sense Solutions' declining revenue likely resulted in a significantly discounted sale price compared to what the business might have commanded during healthier periods. MSP owners should address operational issues before entering sale processes to maximize valuation outcomes.

2. Established buyers seek turnaround opportunities: EMPIST's 25-year track record positioned them to pursue a distressed acquisition that newer market entrants might avoid. This demonstrates how experienced strategic buyers actively hunt for undervalued assets they can improve through operational expertise.

3. Employee count matters in service businesses: The 33-employee workforce represented tangible value for EMPIST, providing immediate service capacity and technical skills. MSP owners should recognize that their team represents significant asset value, especially when revenue per employee metrics remain strong despite overall business challenges.

4. Timing can create opportunities for both sides: While Common Sense Solutions faced revenue pressures, the sale to an established operator like EMPIST likely provided better outcomes for employees and clients than continued independent struggle. Sometimes accepting acquisition during challenging periods delivers superior results to prolonged operational difficulties.