What makes Cogent different from traditional M&A brokers?

Cogent operates as a buy-side advisory firm rather than a sell-side broker, representing buyers but working collaboratively with sellers. They focus on cultural fit and strategic alignment before discussing price, treating M&A as a marriage process rather than running broad auction processes. They're paid by buyers on a success-fee basis but are goal-aligned with both parties.

Why do customer contracts matter so much in MSP valuations?

Strong multi-year customer contracts with enforceable terms provide business sustainability and transferability, allowing buyers to pay more cash at closing with less deferred payment structure. Weak contracts (30-90 day outs or no written agreements) create risk that necessitates earn-outs, seller notes, or retention bonuses to ensure customers remain post-acquisition.

M&A Transaction Therapy for MSP Buyers and Sellers

Name: M&A Transaction Therapy for MSP Buyers and Sellers
Uploaded: 2026-04-14T16:00:35-04:00
Duration: 35 min 57 s
Description: TL;DR Cogent Growth Partners operates as a buy-side M&A advisory firm that treats MSP acquisitions as marriage processes requiring cultural fit and strategic alignment, not just financial transactions The industry lacks a standardized definition of MRR...

Kaseya

04/14/2026

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TL;DR

Cogent Growth Partners operates as a buy-side M&A advisory firm that treats MSP acquisitions as marriage processes requiring cultural fit and strategic alignment, not just financial transactions
The industry lacks a standardized definition of MRR, with many MSP owners conflating different revenue streams that have vastly different margin profiles and sustainability characteristics
Customer contract quality is a critical value driver—MSPs with strong multi-year agreements command higher valuations and more cash at closing, while weak contracts necessitate earn-outs and deferred payments
Most successful MSP acquisitions are talent acquisitions rather than simple book-of-business purchases, making employee retention and relationship distribution critical success factors
Cogent's proprietary financial modeling focuses on cash-return analysis and conservative projections, helping both buyers and sellers understand true business value beyond surface-level revenue metrics

The Buy-Side Advisory Model and Transaction Therapy

Rick Murphy, CEO of Cogent Growth Partners, explains his firm's distinctive approach to MSP mergers and acquisitions. Unlike traditional sell-side brokers who run broad auction processes, Cogent operates as a buy-side advisory firm that treats M&A as a marriage process rather than a property transaction. Their trademarked 'Transaction Therapy' methodology focuses on cultural fit and strategic alignment before discussing valuation. Murphy emphasizes that most MSPs they work with aren't actively for sale but are 'M&A curious' about their company's value and potential partners. The firm represents buyers on a success-fee basis but works collaboratively with both parties to ensure deals succeed, viewing transactions primarily as talent acquisitions rather than simple book-of-business purchases.

Financial Due Diligence and MRR Definition Challenges

A significant portion of the discussion addresses the financial complexities MSP owners face during M&A transactions. Murphy reveals that many MSP owners struggle with accounting fundamentals, which Cogent helps navigate through their proprietary cash-return modeling system. A critical issue is the inconsistent definition of Monthly Recurring Revenue across the industry—what owners report as MRR often includes various revenue streams with different margin profiles. Cogent's discovery due diligence process categorizes revenue into distinct buckets: monthly recurring services, monthly recurring resale, cloud resale, project business, and product revenue. This granular analysis often reveals that reported revenue figures don't reflect actual profitability or sustainability, which directly impacts valuation and deal structure.

Customer Contracts as Deal Value Drivers

Murphy identifies customer contract quality as one of the most significant factors affecting MSP valuations and deal structure. Many MSPs operate with weak contractual protections—30-day or 90-day termination clauses, or no written agreements at all—which creates risk for buyers and necessitates earn-outs, seller notes, or other deferred payment structures. In contrast, MSPs with three-year ironclad contracts that have been tested in court can command higher valuations and receive more cash at closing. The strength of customer agreements directly correlates with business transferability and sustainability post-acquisition. Murphy also emphasizes the importance of non-solicit agreements with employees to prevent customer relationships from walking out the door with departing technicians, a common risk when customer ownership is concentrated in individual team members rather than distributed across the organization.

Chapters

0:00 - Introduction to M&A Unpacked
1:14 - Cogent's Buy-Side Advisory Model
4:42 - Transaction Therapy Explained
14:19 - The First Date Process
15:12 - Financial Modeling and Due Diligence
18:33 - Customer Count and Revenue Embellishment
19:53 - Defining MRR Properly
29:18 - Customer Contracts and Deal Structure
32:20 - Customer Retention and Relationships
34:39 - How to Connect with Cogent

Key Quotes

4:18 "One of our sayings here at Cogent is opportunity first, money last. It's sort of our credo. And the idea being is if you can discover, both sides discover, there's a really good idea to put these businesses together, you can usually make the money work."
5:48 "Most of the deals we do are talent acquisitions, actually. It's not just about buy a book of business, that's sort of a fallacy. A lot of people talk about, we're just gonna buy these clients. Well, that's not our experience. Our experience is really a talent acquisition, bringing all the talent in."
16:15 "A lot of MSP owners are not God's gift to accounting, but that's not really their job. So we're helping them through accounting anomalies and going through their accounting and thinking about how generally accepted accounting principles are applied to their cash accounting scenarios."
19:53 "Everybody's definition of what MRR is, is not the same thing, right? It's just not. And so we do a lot of unpacking of that in our financial review, you know, in our due diligence, especially what we call our discovery due diligence."
30:58 "If I've got three-year ironclad contracts that we've actually tested in court before, or if the customer cancels, I get 100% of my contract paid for, and they do exist and I've seen people do it, we're looking at two different companies right now, they've got great contracts, and they've actually been litigated before, and one, way stronger, and it's gonna help support a stronger purchase price."
33:50 "You've got a tech or two techs that are, it's their customer, so now you've got a, what if that tech leaves, and goes, which is how MSPs are born every day, pretty much, right? Is that the tech's pissed off, an upset tech goes, I own that customer, I'm gonna take that customer with me, right? ..."

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