Recurring Revenue vs. Project-Based Work: What Buyers Prefer

For owners of litigation support companies – whether focused on eDiscovery, digital forensics, trial presentation, managed review, or records retrieval – revenue mix is one of the first things buyers examine when evaluating an acquisition. While strong historical performance matters, how revenue is generated often plays an outsized role in buyer interest, deal structure, and valuation.

One of the most common questions sellers ask is whether buyers truly prefer recurring revenue over project-based work and, if so, what can realistically be done to improve revenue predictability before going to market. The short answer: buyers don’t expect perfection, but they do value visibility, durability, and repeatability.

Why Revenue Predictability Matters in Litigation Support M&A

Private equity firms and strategic acquirers are ultimately underwriting future cash flows. In the litigation support sector, buyers understand that a meaningful portion of revenue will always be project-driven, tied to case volumes, litigation cycles, and client demands. That said, businesses with a higher percentage of recurring or repeatable revenue tend to command stronger valuations and more favorable deal terms.

Predictable revenue reduces perceived risk. It provides confidence that the business can withstand client turnover, case volatility, or economic slowdowns. It also makes forecasting easier, which is particularly important for buyers who plan to invest in growth, bolt-on acquisitions, or make operational improvements post-close.

Recurring Revenue vs. Project-Based Work: How Buyers View the Tradeoff

Project-based work is not inherently negative. In fact, many litigation support firms generate impressive margins through large, complex matters. Buyers appreciate companies that can scale quickly and deliver specialized expertise when stakes are high. However, project-driven revenue is often episodic and harder to forecast, especially if it is concentrated among a small number of clients or cases.

Recurring revenue, on the other hand, signals stickiness and embedded client relationships. Examples might include ongoing managed review services, hosted eDiscovery subscriptions, long-term forensic support arrangements, or preferred vendor relationships with law firms or corporations. Buyers see these revenue streams as more durable and less dependent on constant new business development.

Keep in mind that having multiyear MSAs in place – and even repeat clients – are also looked upon positively, and a skilled M&A advisor, like the Kenyon Group, can help position “nonrecurring” revenue as repeatable and valuable. Because buyers rarely expect litigation support companies to be 100% recurring. What they look for instead is balance – and a credible plan to grow the recurring portion of revenue over time.

How Revenue Mix Impacts Valuation and Deal Structure

Revenue predictability directly affects valuation multiples and risk allocation in a transaction. Companies with higher recurring revenue often see:

Higher EBITDA multiples due to reduced earnings volatility
Greater upfront cash consideration and fewer earnouts
Less buyer concern around customer churn and pipeline sustainability
Stronger lender support if leverage is used in the transaction

By contrast, businesses that rely heavily on one-off projects still attract buyers, but deals may include earnouts, holdbacks, or more conservative assumptions around future growth. To combat this, M&A experts can help drive the narrative and prepare these businesses prior to going to market so that they are always positioned and characterized in a favorable light.

How to Realistically Increase Recurring Revenue Over Time

For first-time sellers, the most important thing to understand is that increasing recurring revenue is a multi-year effort. A pragmatic approach starts with identifying services that already lend themselves to repeat engagement. Many litigation support firms already provide ongoing value – they just don’t always structure or price it that way. For example, law firms that consistently return for discovery hosting, managed review support, or forensic collections may be open to longer-term agreements if the value proposition is clear.

Over time, companies can shift toward recurring revenue by formalizing these relationships. This might include:

Introducing subscription-style pricing for hosting and data management
Offering retainer-based forensic support for frequent litigators
Bundling services into managed solutions rather than selling them case by case

Importantly, these changes should be driven by client needs – not just seller objectives.

Another key lever is client concentration. If a small number of clients generate the majority of recurring revenue, buyers may still see risk. Expanding recurring offerings across a broader client base – even if individual contracts are smaller – can materially improve perceived stability. Locking these clients into a multiyear MSA, including project-based MSAs, is helpful as well.

Operational discipline also matters. Buyers look closely at contract terms, renewal rates, and churn. Tracking recurring revenue separately, documenting renewal processes, and demonstrating consistent retention over several years builds credibility. Even modest recurring revenue growth, if well-documented and sustainable, can meaningfully improve buyer confidence.

Finally, leadership alignment is critical. Sales, operations, and finance teams must understand and support the shift toward recurring revenue. Buyers will assess whether recurring offerings are truly embedded in the business model or still dependent on founder relationships or ad hoc sales efforts.

What Buyers Don’t Expect – and What They Do

Buyers don’t expect litigation support firms to eliminate project-based work, nor do they expect dramatic revenue transformation in a short period. What they do expect is intentionality. A company that understands its revenue mix, can clearly explain its strategy, and has made measurable progress toward predictability will stand out in a competitive M&A process.

For owners considering a sale in the next two to five years, now is a great time to evaluate revenue composition and begin laying the groundwork. Even incremental improvements can pay dividends when it’s time to go to market. But don’t worry, if you’re considering a sale in the near future, it’s certainly not too late. An experienced advisor can walk you through the positioning to ensure you’re ready.

Revenue quality is just one piece of the valuation puzzle, but it is one of the most controllable. With the right planning, litigation support company owners can improve predictability, reduce perceived risk, and position their business to attract sophisticated buyers willing to pay for long-term value.

If you’re a founder or owner of a mid-size litigation support company and are thinking about selling, our team specializes in helping first-time sellers understand what buyers truly value – and how to prepare well in advance of a transaction. We combine deep industry knowledge with hands-on M&A experience to help you maximize outcomes while protecting the culture and legacy you’ve built.