The Vertical He Never Named

Sort the client list of a founder-led MSP by industry and one industry is usually a third of the book. Eleven dental practices. Three community banks and the firms that audit them. The manufacturers along one stretch of highway. Nobody planned it. The founder landed one, that client referred the next, and over ten years he learned the industry’s software, its auditors and its budget calendar by doing the work. He never called it a strategy, so it never became one. His pitch to the twelfth dental practice was ten years of trust. The pitch that scales is ten years of dental practices, and that one can be taught to a seller who has never met him.

Where the money in vertical MSPs sits

ChannelE2E ranks the hundred largest vertical-focused MSPs that report to it each year by recurring revenue inside their vertical. In the most recent list, covering fiscal 2023, those hundred firms billed 2.46 billion dollars. Healthcare was 28 percent of that revenue, financial services 18 percent, manufacturing 11 percent. And 95 percent of the firms on the list sell governance, risk and compliance services.

Read those two facts together. The verticals that built the biggest specialist MSPs are the regulated ones, and the specialists sell compliance. A dental practice does not buy an MSP because it loves technology. It buys one because a HIPAA audit, a payer contract or a cyber insurance renewal asks a question it cannot answer, and the MSP that already answered it for eleven other practices can answer it again in one meeting. That is a pitch with a script.

Private equity has already priced it

FFL Partners, which bought into Abacus Group in 2022, merged Abacus with Medicus IT in July 2025 to form one platform “exclusively focused on the financial services and healthcare industries.” Jonathon Bunt, a partner at FFL, said why: “We have seen significant demand from both prospective clients and investors for IT MSPs that are vertical experts in sectors where compliance and cybersecurity are paramount.” Jonathan Bohrer, president of Abacus, put a number on the combined market, more than 20 billion dollars, and one sentence on the thesis: “Our focus on these two large, highly regulated verticals is what sets us apart.” A year later Abacus placed third on the Channel Futures MSP 501, up from twentieth.

Broad Sky Partners made the same bet in legal in December 2024, investing in Frontline Managed Services, which serves more than 800 law firms and over half of the Am Law 200. Two sponsors, three regulated industries, one thesis: a book concentrated in an industry the founder understands is not a risk to be diluted. It is the asset.

The seller they hired

Six months before the merger, Medicus IT hired a chief revenue officer. The announcement gave his job in one line: “lead sales, marketing, and channel development for Medicus IT’s growth across the healthcare provider markets.” An industry defines the job, where most MSP sales roles are defined by a territory or a company size. Medicus serves more than 6,500 providers, and the person hired to add the next thousand was chosen for what he knows about healthcare. Who he knows came second.

That is the transition step. The founder sold on a relationship with the practice manager. A vertical sales motion sells on the things the practice manager needs to hear: which regulation the MSP has already carried a client through, which practice management and records systems it supports, what the price is per provider, and the names of three practices like this one that will take the call. Every one of those can be written down, and once written down it can be handed to a seller. The buyers say so themselves. When Datto asked more than 1,100 small businesses in 2020 what they weigh when hiring an IT provider, cost came first, but “understanding my business” was named by 47 percent and “focus on my industry” by 30 percent, ahead of a recommendation from someone they know.

What an owner should ask

Here is the insight for a PE owner. The founder built a healthcare MSP, or a legal one, or a manufacturing one, without naming it. Your job is to name it, because the concentration already exists in the book whether or not anyone named it, and the named version has a pipeline where the accidental version had a founder.

At the next operating review, ask for recurring revenue by client industry. If one industry is 30 percent or more of the book, it is a vertical. Then ask for four things that do not yet exist on paper. The pitch for that industry: the regulations, the applications, the price per provider or per seat. The reference list, built from the accounts the founder already won by accident. The next sales hire’s job description, written for the industry rather than the zip code. And win rate inside the vertical against win rate outside it, so the board can watch which one the engine is good at.

The risk in a vertical book is real: one regulatory change or one bad year in the industry hits every client at once. But that exposure is on the balance sheet today, unnamed and unmanaged. Naming it is how it gets a strategy, a price and a seller who is not the founder.