IT capabilities becoming value drivers in highly selective IT services mergers and acquisitions landscape

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IT capabilities becoming value drivers in highly selective IT services mergers and acquisitions landscape

Thu, 09/02/2021 - 04:40
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London, UK – 02 September 2021. The latest IT & Business Services M&A market report from Hampleton Partners, the international technology mergers and acquisitions advisor, reveals that the wave of M&A interest in IT Services has abated, although valuations are picking up again.

The IT & Business Services sector saw a dip in the number of M&A transactions in the first half of 2020, with 326 deals recorded compared to 437 deals in the second half of 2020.

In the first half of 2021 the trailing 30-month median EBITDA multiple ticked up to 8.9x, while the trailing 30-month revenue multiple maintained a higher than median level at 1.2x.

Miro Parizek, founding partner, Hampleton Partners, said: “It appears the number of deals has decreased as the sellers of IT Service companies have demanded higher multiples.

“Their desire for better pricing is understandable, given the fast recovery of tech stocks providing for higher comparables from the publicly traded peer group.”

IT integration – a top priority

Systems and cloud integration solutions are garnering a lot of attention, particularly in the age of online and hybrid models. Many businesses have definitively swapped on-site technology and services in favour of remote, outsourced and easily accessible virtual solutions – including public sector institutions such as schools and government agencies.

A deal indicative of this trend is the acquisition of Liberty IT Solutions by IT consultant, service provider and software developer Booz Allen Hamilton for $725 million.

Liberty IT was founded in 1996 and is headquartered in Virginia, USA, with 600 employees. The company has been a leading digital partner for IT transformation and integration across the US government and federal IT ecosystem.

Professional services firms make up high volume of dealmaking

Professional services firms continue to make the most acquisitions, with Accenture acquiring 74 companies and Deloitte acquiring 12 companies over the past 30 months to cover all types of emerging client needs.

The largest disclosed deals in the first half of 2021

  • Hitachi acquires GlobalLogic Inc. - $8.5 billion
  • Allied Universal acquires G4S plc for $5.3 billion
  • Ve Peraton Corp. acquires Perspecta Inc. for $4.7 billion

IT & Business Services M&A 2021

Miro Parizek, said: “After a very hot second half of last year for M&A in the IT Services sector, we saw a material reduction in transaction volume during the first half of 2021, while at the same time valuation metrics ticked upwards.

“We anticipate an increase in transaction volume in the sector and believe the valuation metrics will remain stable in the second half of 2021.”

Hampleton’s IT & Business Services M&A report analyses transactions, trends and activity across the Integration, Technology and Support Services segments as well as IT Outsourcing.