Skilled staff shortage and cybersecurity concerns drive "super growth" in IT & Business Services M&A, says Hampleton Partners
London, UK – 21 September 2022. The latest global IT & Business Services M&A Market report from Hampleton Partners, the international M&A and corporate finance advisory firm for technology companies, reveals that sector transaction volume reached a record 699 deals in 1H2022, a massive 92 per cent increase year-on-year.
Miro Parizek, founder and principal partner, Hampleton Partners, said: “Many IT services players are buying up providers in niche areas to fill in gaps in domain expertise and experienced specialists.
“In parallel, staff shortages have compelled CIOs to outsource tasks to managed service firms, 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 trade buyer, merge or partner with a private equity player to defend or establish leadership positions on a global scale.”
As for valuations, Hampleton Partners reported a stable median revenue multiple of 1.3x.
However, the median EBITDA multiple paid out for IT Services companies rose to 9.4x, inching past figures achieved during the height of the Covid pandemic, when remote working and digital transformation were a major focus for CIOs.
Hampleton reported that the Tech Services & Support segment saw the highest overall increase in the sector, with 473 deals in 1H2022 up from 310 in 2H2021, a 53 per cent increase. Cybersecurity integration and sustainability consulting are helping drive this rise.
Cyber- and IT security consulting services garnered huge interest in 1H2022. Largest amongst them, the $400 million acquisition of Xator Corporation by US-based technology company Parsons Corporation (NYSE:PSN). Founded in 2005, Xator provides mission-focused solutions to protect critical infrastructure and address national security requirements for the U.S. Government around the world.
This against a backdrop of broader concern amongst senior management and CIOs that cyberattacks are becoming more complex and that their hybrid and remote-working employees are vulnerable as attacks increase in volume and scope.
Sustainability driving M&A deals
Acquirers have shown a massive interest in sustainability and ESG data consulting firms.
Dutch management and technology consultancy Bearing Point acquired ICare, which has more than 80 employees in France and Brazil, and offers consulting services to public organisations, NGOs, private companies and financial institutions to help them respond to the risks and opportunities of environmental transition.
Other acquisitions in the space include Keter Environmental Services’ acquisition of Link International, which helps companies divert millions of tons of waste from landfill; and Etteplan’s acquisition of Finnish 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 enterprises, inflation, delivery uncertainty, and geopolitical risk have accelerated the transition from IT ownership to IT service sourcing, meaning more spending on managed services and cloud than on on-premise capabilities.
“In terms of M&A, Private Equity sponsors have billions of investor monies waiting for investment opportunities and their 30 plus percent share of IT Services deal activity is likely to continue.”
Hampleton Partners' Enterprise Software M&A Market Report
Download the full Hampleton Partners’ IT & Business Services M&A Market Report 2H2022: https://www.hampletonpartners.com/reports/it-business-services-report
Note to Editors
Hampleton Partners’ M&A Market Reports are compiled using data and information from the 451 Research database (www.451research.com); Capital IQ; CB Insights; Gartner; IDC and more.
About Hampleton Partners
Hampleton Partners is at the forefront of international mergers and acquisitions and corporate finance advisory for companies with technology at their core. Hampleton’s experienced deal makers have built, bought and sold over 100 fast-growing tech businesses and provide hands-on expertise and unrivalled advice to tech entrepreneurs and companies which are looking to accelerate growth and maximise value.
With offices in London, Frankfurt, Stockholm and San Francisco, Hampleton offers a global perspective with sector expertise in: Artificial Intelligence, Autotech & Mobility, Cybersecurity, Digital Commerce, Enterprise Software, Fintech, Healthtech, HR Tech, Insurtech and IT & Business Services.