An IT services business in Australia typically sells for 3x to 6x EBITDA — but that range is doing a lot of heavy lifting. A managed services provider with $150K in monthly recurring revenue, a 65% gross margin, and a team that can keep things running without the founder in the room sits at the upper end. A consultancy where every client engagement flows through the founder’s relationships, and where the “IP” lives mostly in his head, sits considerably lower. Perth, Melbourne, and Sydney all have active markets for IT business acquisitions right now, driven by PE roll-ups and listed IT groups looking to buy revenue they can’t grow fast enough organically.
The single question every buyer is trying to answer: what happens to this business when you leave?
What EBITDA Multiple Does an IT Services Business Get in Australia?
The Australian technology M&A market has been active for the better part of a decade, with private equity and listed IT groups — think DXC, Capgemini’s acquisition of Empired, the Versent deals — buying up smaller operators at pace. This has pushed multiples up across the board. But it hasn’t made them uniform.
Here’s where the market is currently sitting for IT services businesses:
| Business Type | EBITDA Multiple Range |
|---|---|
| Managed services provider (MSP), 70%+ recurring revenue | 4.5x – 6.5x |
| Mixed MSP / project, 40–70% recurring revenue | 3.5x – 5x |
| IT staffing / resource augmentation | 2.5x – 4x |
| Pure project / implementation consultancy | 2x – 3.5x |
| Solo founder, key-person dependent | 1.5x – 2.5x |
These are what strategic buyers and PE-backed roll-up platforms are paying. Business broker transactions for smaller operators — say, $300K–$800K in EBITDA — typically sit one to one-and-a-half turns below these figures. Your EBITDA number needs to be normalised before a multiple is applied: add back owner salary above what a market-rate replacement manager would cost, personal vehicles, any subscriptions or costs that won’t survive the sale, and one-off project revenue that isn’t likely to repeat.
Rule of thumb: a well-run MSP generating $1.5M in annual revenue should be producing $250K–$450K in EBITDA. At a 4x multiple, that’s $1M–$1.8M in business value — before hardware, prepaid contracts, or deferred revenue are factored in.
To understand how EBITDA multiples work across industries, the business valuation based on net profit guide walks through the normalisation process in detail.
Why Recurring Revenue Changes Everything
The gap between a 2.5x and a 5.5x multiple often comes down to one number: monthly recurring revenue. A buyer paying $2M for a business is essentially buying a stream of future earnings. The more predictable that stream, the more they’ll pay. The more project-dependent it is — where every dollar of next year’s revenue has to be re-won from scratch — the less they’ll pay.
For IT services businesses, recurring revenue usually comes in a few forms:
- Managed services contracts — fixed monthly fee for infrastructure management, helpdesk, cybersecurity monitoring. These are gold. Multi-year contracts with auto-renewal clauses are better.
- Software licensing agreements — reselling Microsoft 365, Azure, AWS, or similar, with a margin on consumption. Valuable, but thin margin and somewhat commoditised.
- Support and maintenance retainers — annual agreements for system support. Useful, but often softer than managed services because clients can cancel without penalty.
A business with 70% of its revenue locked into managed services contracts — documented, transferable, with reasonable notice periods — commands a premium that a project-based consultancy simply cannot. Project revenue is valuable, but a buyer has to discount it because they don’t know whether those clients will stay. Contracts they can read and underwrite during due diligence are worth more than relationships they have to trust.
This is also why documentation matters so much. I’ve seen owners who had strong recurring client relationships and could prove it on bank statements but hadn’t formalised the agreements. The revenue was real. The contracts weren’t. During due diligence (which is where deals either progress or die), buyers couldn’t get comfortable with the renewability of the income. The deal still closed, but at a lower multiple than the business deserved. On a $2M deal, the difference between a 4x and a 5x multiple is $500K. That’s worth a few hours with a lawyer to formalise your retainer agreements.
What Buyers Are Actually Looking For
Buyers of IT services businesses are looking for four things: recurring revenue, gross margin quality, customer diversification, and operational independence from the founder.
Gross margin matters as much as EBITDA. An IT services business generating $400K EBITDA on $1.5M revenue (27% margin) looks very different to a buyer than one generating $400K on $3M revenue (13% margin). The first is a clean, scalable business. The second is working very hard for the same number. High-margin IT businesses — those running managed services, cybersecurity, or cloud architecture — routinely achieve 45–65% gross margins. Staffing and labour-hire IT businesses can sit at 15–25%. That margin difference flows directly into the multiple.
Customer concentration is the most common deal-killer. If your top three clients represent more than 50% of revenue, a buyer will discount the multiple or require you to hold an earnout until they’ve seen retention post-settlement. I spoke with a broker last year who’d been working a deal where an IT managed services business in Brisbane had a single client — a large mining services company — representing 62% of revenue. The business was profitable and well-run. The deal took eighteen months, ended up structured as 60% cash on settlement and 40% earnout over two years, and closed at 3.2x EBITDA rather than the 5x the vendor expected. One client. One and a half million dollars in lost value.
The founder who can’t be replaced is a structural problem for buyers. If the founder is the one doing the sales, managing the senior client relationships, and holding the technical knowledge that keeps the most complex clients happy — then there’s no business without them. Buyers know this. They’ll either price the risk in, or they’ll require a longer transition period and an earnout tied to retention. The fix is not complicated, but it takes time: systematise what you know, document your processes, develop your team, and let your technical leads run client relationships before you go to market.
The Rule of 40 — and Where It Actually Applies
You’ll hear the rule of 40 mentioned in tech M&A circles (it’s one of the more popular pieces of jargon that does, unusually, mean something). It says a healthy software or SaaS business should have its revenue growth rate plus its EBITDA margin add up to 40 or more. A business growing at 25% with a 15% margin scores 40; a business growing at 10% with a 30% margin also scores 40.
It’s primarily a framework for SaaS businesses, not pure IT services. But it’s increasingly being used by buyers as a quick screen for IT services companies with a recurring revenue component — because it captures the trade-off between investing in growth and generating profit today.
If you’re an MSP growing at 20% year-on-year with a 25% EBITDA margin, you score 45. You look attractive to a buyer who wants a growing, profitable platform to bolt other acquisitions onto. If you’re flat-lining at 2% growth with a 38% margin, you score 40 but raise different questions — you’re profitable but not growing. Both can sell well; they attract different buyer profiles.
Rule of thumb: IT services businesses in Australia scoring 35 or above on the rule of 40 are generally seen as acquisition-ready by PE and strategic buyers. Below 25, expect hard questions about why growth has stalled or margins have compressed.
What Kills IT Business Deals
The valuation is one thing. Whether a deal actually gets done is another (and the gap between the two is where corporate advisors earn their fees).
The recurring themes in failed or re-priced IT business deals:
- Undocumented IP and systems. If your monitoring scripts, client configurations, and runbooks exist only as institutional memory — in the heads of your senior technicians — a buyer has nothing to acquire except a team they hope will stay.
- Single-vendor dependency. A business that is essentially a Microsoft shop, a Cisco reseller, or an AWS partner — and whose margins depend on maintaining those partner tiers — carries vendor risk. If Microsoft changes its partner program (which, as IT business owners know, it does), the margin structure changes with it.
- Uncontracted staff. IT businesses with key technicians on casual arrangements, or with no non-solicitation provisions in employment agreements, present a retention risk. Buyers will either price this in or make it a condition of settlement.
- Mixed personal and business finances. This one delays more deals than almost anything else. If your accountant has been running personal expenses through the business for years — which is legal but requires clean explanation — the normalisation of EBITDA becomes a negotiation, not a calculation. Get this sorted before you go to market, not during due diligence.
Preparing your financials properly before a sale process starts is worth far more than it costs. The preparing your business for sale guide has a 12-month checklist worth working through regardless of your timeline.
Where to Start
If you’ve read this far and are starting to think seriously about a sale, the first thing to do is get an independent view on what your business is worth — not a guess based on a multiple you read online, but a proper assessment of your normalised EBITDA, your contract quality, and where your business sits in the current buyer market.
Use the Miro Capital valuation calculator for a starting estimate, or contact us directly if you want a more detailed conversation. We work with IT services business owners across Australia — Perth, Melbourne, Sydney — and can give you a realistic picture of where the market sits and what your options are.
Understanding the full M&A process is also worth doing early, before you’ve committed to anything. Most owners who get the best outcomes spend six to twelve months preparing before they run a formal sale process. The tax implications of selling a business are also worth understanding upfront — particularly the small business CGT concessions, which can have a significant impact on what you actually keep.
The IT services sector is one of the most active in Australian M&A right now. That’s good news if you own one. It’s particularly good news if yours has recurring revenue, clean financials, and doesn’t fall apart when the founder leaves the room.