In certain instances, we may earn revenue when a reader makes a purchase or completes a form through our pages or on a partner’s website. We adhere to a strict The managed services market is off to a powerful start in 2025, with merger and acquisition (M&A) activity surging past $1 billion in disclosed deals during the first quarter (Q1) alone.
But the real story goes deeper than the numbers. According to the Drake Star Q1 2025 MSP Market Update, artificial intelligence (AI) is no longer just a tool – it’s changing how managed service providers (MSPs) operate at every level, from support tickets to strategy.
This article explores how automation and smart tech are changing the MSP industry, and why investors are backing providers that can scale quickly, deliver more value, and stay ahead of client needs.
Key Takeaways
- Over 100 MSP deals were made public in Q1 2025, with more than $1 billion in disclosed value.
- Strategic buyers and private equity firms are showing clear interest in providers that can grow quickly, offer steady revenue, and use smart automation tools to stay efficient.
- AI enhances MSPs’ work, with chatbots, smart triage, and real-time insights helping providers respond faster and personalize support across AI-managed services.
- Top-performing MSPs are expanding their service range, adding tools for cloud, cybersecurity, and predictive support while also moving into new markets.
- The MSP industry is expected to reach $571 billion by 2033, with growth driven by automation, scalable operations, and demand for flexible tech solutions.
M&A Momentum Is at an All-Time High
The managed services market is in the middle of a major investment surge. In the first quarter alone (Q1 2025), 107 MSP deals were made public. The total value of those disclosed deals crossed the $1 billion mark, but that’s only the deals we know about – many others didn’t reveal any numbers, so the real figure is likely much higher.
This flurry of deals shows just how hot the MSP industry has become in 2025. There’s growing demand for scalable, tech-enabled providers, and both strategic buyers and private equity firms are paying close attention.
Here’s what’s standing out this quarter:
- Strategic buyers are making bold moves. All of the top 10 acquirers picked up at least four companies each. Most of their targets were in IT consulting and outsourcing, sectors that made up 77% of total M&A activity in Q1.
- Private equity is stepping in too, but in a more focused way. Most investors made a single deal, looking for providers with strong recurring revenue and room to scale. AI integration and automation are key selling points.
- Buyers are especially focused on acquiring managed service providers that offer cloud support, cybersecurity, and AI-powered tools – services in high demand across various industries.
The MSP space is clearly evolving. Thanks to AI and smarter IT workflows, providers are becoming more efficient and predictable, and that kind of stability is exactly what investors want right now.
AI Is Rewriting The MSP Playbook
For managed service providers, AI is no longer just a useful extra – it’s becoming the backbone of how they run. It’s changing daily operations, improving service, and opening up new ways to grow.
Many MSPs are already using AI to handle tasks that used to take up hours of manual work. Things like ticket routing, incident triage, and system checks are now done automatically, and the results are hard to ignore.
Platforms like Zofiq and PIA.AI report:
- Ticket workloads have dropped by as much as 50%
- Operating costs are down by 30–50%
- Support issues are being resolved up to eight times faster
AI in IT support means more than just faster fixes; it also allows MSPs to offer more personalized help. With tools like real-time sentiment analysis and smart chatbots, providers are seeing a 20% boost in customer satisfaction.
And it’s not just about doing more – it’s about earning more. Financial models from Zofiq suggest that AI-powered services can increase revenue by around 11%, while ITBD puts that number closer to 15% in some cases.
Thanks to IT automation, even smaller MSPs are starting to deliver high-level service without the heavy costs, making them more competitive and more attractive to investors.
Why Investors Are Betting On AI-First MSPs
Managed service providers that lean into AI are doing more than just saving time – they’re building stronger, more scalable businesses. These MSPs tend to run more efficiently, offer better client experiences, and, most importantly, hold onto their customers. That kind of stability is exactly what investors are looking for.
Over the past few months, several high-profile deals have shown where the market is heading:
- Sophos bought Secureworks for $859 million, aiming to strengthen its threat detection tools and expand its reach.
- Thrive secured $1.5 billion in funding from Berkshire Partners to grow its AI capabilities and scale faster.
- DataBank raised $250 million to expand its data centre footprint and prepare for the future of AI-driven infrastructure.
Today’s managed IT industry is heavily influenced by firms that utilize AI to deliver more value, faster. These companies are more proactive, more adaptable, and often better at meeting client needs before problems even start.
The potential for growth is massive. The managed services market hit around $305 billion in 2024 and is expected to grow to nearly $571 billion by 2033. With that kind of forecast, it’s clear why investors are paying attention.
What Sets High-Growth MSPs Apart In 2025
The top-performing MSPs in 2025 are doing more than just covering the basics. They’re offering a wider mix of services, reaching more markets, and finding smart ways to scale. This shift is clear in the kinds of companies buyers are targeting.
Service variety is a big reason why some providers are standing out. Investors aren’t just looking for help desk support; they want firms that can offer:
- Security services that protect across devices and networks
- System software that supports cloud-native operations
- Full-service managed IT support for modern businesses
Geographic reach matters too. Most of the deal activity in Q1 2025 came from the US and Europe, with 77% of the acquisitions focused on IT consulting and outsourcing. These are the areas helping MSPs grow across borders and build stronger global partnerships.
Some providers are using this moment to grow in smart, strategic ways. Companies like Seidor and Atturra are making acquisitions that help them expand internationally while introducing AI-led transformation services to their clients.
But strategy alone isn’t enough – it’s the execution that really makes the difference. The MSPs that are rising to the top are the ones that can deal with everyday challenges while still pushing forward.
These providers know how to:
- Attract and retain skilled talent in a tight hiring market
- Handle complex integrations across different platforms and clients
- Get new systems running smoothly without delays or disruptions
And as expectations rise, so do the tools needed to meet them. Managed IT services in 2025 now include predictive analytics, AI-based triage, and automated compliance monitoring, enabling MSPs to deliver faster and smarter support.
The Bottom Line
The managed services market continues to grow at speed, with AI playing a major role in how MSPs deliver value. Investors are focusing on providers that can scale efficiently, personalize support, and stay ahead of client needs.
In 2025, success in the MSP industry depends on more than size – it comes down to execution, smart tech, and the ability to adapt quickly.
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References
- Drake Star Global MSP Report 2023 (Drake Star)
