IT Services & MSPs Mezzanine Debt & Capital Stack: An Independent Sponsor's Counsel
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.
Mezzanine Debt & Capital Stack on IT services and MSPs deals is one of those workstreams that looks routine on a checklist and decides outcomes in practice.
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 Mezzanine Debt & Capital Stack actually gets structured.
Target senior leverage at 3.0x to 3.5x EBITDA, mezzanine at 1.0x to 1.5x on top.
Negotiate an intercreditor agreement that does not throttle the operator.
Structure mezzanine with PIK toggle and warrants priced into the IRR model.
Confirm covenant headroom of at least 20 percent at close.
In IT services and MSPs, layer in MSA assignment review with carve-outs noted as part of the Mezzanine Debt & Capital Stack workstream.
Letting the lender pick the intercreditor terms. Those terms decide what the operator can do on day 180.
"The capital stack is a contract, not a spreadsheet. Read every page of every term sheet."Jason Powell · Mezzanine Debt & Capital Stack
The deal is one thing. The capital that opens up after close is another.
After close, the call list for refinancing, recapitalization, and growth equity gets short and known. Jason carries that list.
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Bring the IT services and MSPs deal. Get Mezzanine Debt & Capital Stack done right.
Direct counsel from a securities and M&A attorney with billions in structured transactions, the independent-sponsor-native playbook, and the capital markets network that opens up post-close.