London, United Kingdom – September 21, 2022. The latest global M&A market report for IT and business services from Hampleton Partners, the international M&A and corporate finance advisory firm for technology companies, shows that the sector’s transaction volume hit a record high of 699 deals in the first half of 2022, a massive increase of 92 percent compared to the previous year.
Miro Parizek, Founder and Major Shareholder of Hampleton Partners, said: “Many IT service providers are buying up niche providers to fill gaps in expertise and experienced specialists.
IT & Business Services M&A Volume and Valuation Multiples
“In parallel, staffing shortages have forced CIOs to outsource tasks to managed service companies, which are therefore now in high demand and valuable.
“On the sell side, IT services companies are using the M&A market to sell to a commercial buyer, merge with a private equity firm, or partner to maintain or build leadership positions on a global scale.”
As for valuations, Hampleton Partners reported a stable mean revenue multiple of 1.3x.
However, the median paid-out EBITDA multiple for IT services firms rose to 9.4x, surpassing numbers achieved during the height of the Covid pandemic, when remote working and digital transformation were a key focus for CIOs.
Hampleton reported that the Tech Services & Support segment saw the highest overall growth in the industry with 473 deals in 1H2022 versus 310 in 2H2021, an increase of 53 percent. Cybersecurity integration and sustainability consulting are helping drive this increase.
Cybersecurity mergers and acquisitions
Cyber and IT security consulting services attracted a lot of interest in 1H2022. The largest of these was the $400 million acquisition of Xator Corporation by US technology company Parsons Corporation (NYSE:PSN). Founded in 2005, Xator provides mission-driven solutions to protect critical infrastructure and meet national security requirements for the US government around the world.
This amid broader concerns among executives and CIOs that cyberattacks are becoming more complex and their hybrid and remote worker workforce more vulnerable as attacks grow in scale and scope.
Sustainability drives M&A deals
Acquirers have shown massive interest in sustainability and ESG data consulting firms.
Accenture has bought several European ESG advisory firms, including London-based Avieco, Brussels-headquartered Greenfish and most recently akzente, a German sustainability consultancy.
Dutch management and technology consultancy Bearing Point acquired ICare, which employs more than 80 people in France and Brazil and provides consulting services to public organizations, NGOs, private companies and financial institutions to help them respond to the risks and opportunities of green transition.
Other acquisitions in this space include Keter Environmental Services’ acquisition of Link International, which helps the company divert millions of tons of waste from landfills; and Etteplan’s acquisition of Finland’s LCA Consulting, experts in life cycle assessment (LCA) and carbon footprint calculation for private and public sector companies.
The future of IT & Business Services M&A
Miro Parizek, said: “For many companies, inflation, supply uncertainty and geopolitical risks have accelerated the transition from IT ownership to IT service sourcing, which means spending more on managed services and cloud than on on-premises capabilities .
“Regarding M&A, private equity sponsors have billions of investor funds awaiting investment opportunities, and their share of more than 30 percent of IT services transaction activity is likely to continue.”
Download the complete Hampleton Partners IT & Business Services M&A Market Report for the second half of 2022: https://www.hampletonpartners.com/reports/it-business-services-report/
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Note to the editor:
Hampleton Partners’ M&A market reports are compiled using data and information from the 451 Research database (www.451research.com); capital IQ; CB Insights; Gardener; IDC and more.
About Hampleton Partners
Hampleton Partners is a leader in international mergers and acquisitions and corporate finance advisory for technology-centric companies. Hampleton’s experienced dealmakers have built, bought and sold numerous fast-growing technology companies and provide practical expertise and unrivaled advice to technology entrepreneurs and companies looking to accelerate growth and maximize value.
With offices in London, Frankfurt, Stockholm and San Francisco, Hampleton offers a global perspective with industry expertise in: Artificial Intelligence, Autotech, Cybersecurity, Digital Commerce, Enterprise Software, Fintech, Healthtech, HR Tech, Insurtech and IT & Business Services.
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