Most private equity-backed IT services acquisitions have a solid strategy. The investment thesis is clear, the value creation plan is well-constructed, the 100-day priorities have been debated and signed off. I've sat in enough rooms on Day 3 to know that none of that preparation makes the next six weeks any easier. By the time a deal closes, the strategic direction has had more scrutiny than almost any other decision the business will make.
And then the deal closes, and everything gets complicated.
What tends to go wrong isn't strategy. It's the six weeks after completion, when the adrenalin has worn off, the management team is fielding questions from staff they don't yet have answers to, and the integration workstream that looked manageable in a deck is revealing itself to be considerably less manageable in practice. The operational texture of a business: the informal relationships that hold client accounts together, the unwritten processes that keep delivery running, the single engineer who is, for reasons nobody documented, the reason three enterprise clients renew every year. None of that compresses neatly into a data room.
This isn't a criticism of diligence. Financial and commercial diligence is sharper than it's ever been. The SaaS metrics people interrogate now (NRR, logo retention, expansion revenue, cohort analysis) were barely part of the conversation a decade ago. The pre-deal process has improved. The gap is almost always what comes after.
The businesses that navigate integration well aren't the ones with the best strategy decks. They're the ones that planned the operational detail before the deal closed, not after. Who's managing the customer communication programme and to what timeline? What's the staff retention plan for the first 90 days, not the first year? Which delivery processes are being touched by integration and what's the contingency if something breaks? How are you handling the vendor programme implications of the combined entity's spend profile?
These aren't glamorous questions. They don't show up in an investment committee presentation. But they're the questions that determine whether Year 1 looks like the plan or like a recovery exercise.
There's a particular challenge in buy-and-build specifically. Serial acquirers are adding businesses every few months. The integration playbook that worked for the first acquisition gets stretched, applied too quickly, or quietly abandoned as the pace increases. Platform economics are real and the rationale for consolidation is usually sound. But each acquired business has its own customer relationships, its own delivery culture, its own way of doing things that took years to build. The assumption that those things can be absorbed at pace without material risk is how good platforms occasionally create serious service delivery problems.
47% of private equity value creation in IT services now comes from operational improvement rather than financial engineering or multiple expansion. That number has been climbing for years and it reflects something the market has learned the hard way. You can't model your way to a great exit from a managed services business. You have to run it properly.
The strategy is almost always fine. Ask harder questions about the execution.