The Deal
Virtual IT Group (VITG), a Riverside Company-backed managed services platform, acquired The Instillery, an Australian managed security services provider specializing in cybersecurity solutions for small and medium enterprises. The transaction was announced in 2024 as part of VITG's strategic expansion into the cybersecurity market.
The Instillery brings specialized security expertise to VITG's existing managed IT services portfolio, creating a more comprehensive offering for SME clients. This acquisition represents a classic capability expansion play, where a traditional MSP platform adds dedicated security services to address growing market demand.
Financial terms of the transaction were not disclosed, consistent with many mid-market MSP deals where buyers prefer to keep valuation metrics private. The deal structure appears to be a straightforward acquisition rather than a merger, with The Instillery's operations being integrated into VITG's broader platform.
Strategic Logic
This acquisition addresses a clear gap in VITG's service portfolio while targeting the underserved SME security market. Traditional managed IT services providers often struggle to deliver sophisticated cybersecurity solutions, creating an opportunity for platforms that can combine both capabilities under one roof.
The strategic fit centers on several key factors:
- Complementary services: VITG's infrastructure management pairs naturally with The Instillery's security monitoring and response capabilities
- Shared target market: Both companies focus on SME clients who need enterprise-grade security but lack internal IT resources
- Cross-selling opportunities: Existing VITG clients represent immediate prospects for security services, while The Instillery's client base can benefit from expanded IT management
The timing reflects broader market dynamics where cybersecurity has become a board-level concern for businesses of all sizes. SMEs particularly struggle with security staffing and expertise, making managed security services an attractive outsourcing option. By combining traditional MSP services with specialized security capabilities, VITG positions itself as a one-stop solution for comprehensive IT management.
Valuation Context
While deal terms remain undisclosed, this transaction occurs during a period of continued strong valuations for security-focused MSPs. Pure-play MSSPs typically command premium multiples compared to traditional MSPs due to higher growth rates, stronger recurring revenue, and increasing market demand for cybersecurity services.
The Australian market has seen particularly active MSP M&A activity, with both domestic and international buyers competing for quality assets. Security-focused providers benefit from this competitive dynamic, especially those with established SME client relationships and proven service delivery capabilities.
Private equity platforms like VITG often pay competitive multiples for add-on acquisitions that enhance their core value proposition. The strategic premium reflects not just The Instillery's standalone performance, but its contribution to VITG's overall platform value and exit potential. This approach allows PE-backed platforms to justify higher acquisition multiples by capturing synergies and cross-selling opportunities across the combined client base.
What MSP Owners Should Know
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Security specialization commands premium valuations. Pure-play MSSPs and MSPs with strong security capabilities consistently achieve higher multiples than traditional infrastructure-focused providers. The growing cybersecurity threat landscape and regulatory compliance requirements drive sustained demand for these services.
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Platform buyers prioritize capability gaps over geographic expansion. VITG's acquisition of The Instillery demonstrates how PE-backed platforms focus on adding new service lines rather than simply buying more of the same. MSPs with differentiated capabilities that complement common platform needs are particularly attractive acquisition targets.
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SME-focused security providers represent a sweet spot for acquirers. The combination of underserved market demand and scalable service delivery makes SME-focused MSSPs attractive to both strategic and financial buyers. This market positioning often leads to competitive bidding processes and favorable deal terms.
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Cross-selling potential drives acquisition premiums. Buyers increasingly value targets that can immediately benefit existing client relationships. MSPs with services that naturally complement common platform offerings should emphasize these synergies when positioning for exit, as they directly impact valuation multiples and deal competitiveness.