Management Incentive Plans (MIP) for IT Services & MSPs Independent Sponsors
Securities and M&A counsel for independent sponsors structuring IT services and MSPs transactions, from LOI to close to the capital markets that open up afterward.
IT Services & MSPs deals in the lower middle market run a specific playbook. Management Incentive Plans (MIP) is where the structure either holds or starts to leak.
The typical IT services and MSPs platform sits at $8M to $100M EV with EBITDA in the $2M to $18M range. The thesis runs on MSP platform with regional or vertical-specific bolt-ons. An MSP at 70% recurring revenue trades at one multiple, at 90% trades at a different one. The mix is the deal.
How Management Incentive Plans (MIP) actually gets structured.
Size the MIP at 10 to 15 percent of post-close equity, with 60 percent time-vested and 40 percent performance-vested.
Use profits interests for tax efficiency, with a clear strike value at grant.
Build double-trigger acceleration on change of control plus termination.
Document the MIP in the LLC operating agreement, not in a separate plan only.
In IT services and MSPs, layer in MSA assignment review with carve-outs noted as part of the Management Incentive Plans (MIP) workstream.
Promising the MIP percentage in the LOI without modeling the impact on the LP waterfall. The LP finds out and the deal stalls.
"MIPs are the cheapest retention tool you have. Use them deliberately, document them precisely."Jason Powell · Management Incentive Plans (MIP)
The deal is one thing. The capital that opens up after close is another.
Most independent sponsors solve the closing capital and then run into the post-close capital problem alone. The capital markets relationships that matter at month 18 are part of this practice.
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Management Incentive Plans (MIP) for IT Services & MSPs, on independent sponsor terms.
Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.