The services sector is attracting the highest valuations among technology companies. The latest IT & Business Services M&A market report from Hampleton Partners, tech M&A experts, reveals how Covid-19 is putting the IT sector on the frontline and its customers are changing their consumption models.
Companies in the IT Outsourced Services segment continued to attract the highest valuations - 9.7x trailing 30-month median EBITDA multiple. The Tech Services & Support segment accounted for 44 per cent of deals, the largest in the IT & Business Services sector.
Miro Parizek, founding partner, Hampleton Partners, says: “So far in 2020, the IT & Business Services sector has seen stable M&A activity. Lockdown measures around the world have accelerated the move to digital, providing ample opportunity for IT players to shine if they can digitise products, processes and services.
“At the same time, valuations have come in somewhat lower and deal-making was more regionally oriented, especially in Q2, as global travel was impacted by travel restrictions. Unsurprisingly, outsourcing companies, which offer services ranging from payment processing to software development, continue to enjoy strong growth on the back of improved global connectivity and the ever present need to reduce costs.”
The report says that services from companies in demand aim to resolve some of the challenges posed by the rise in home-working including:
- Back-up and Disaster Recovery strategies
- Data Security in the Cloud
- Balancing flexibility, scalability, efficiency and cost
As a result, the report says, the IT Services sector is in a paradoxical position: while the pandemic is causing lower deal volumes and valuations, some areas in IT are evidently poised to benefit from the shift to online and from other changes in our use of technology this year.
The report also found that:
Public sector firms lag behind in terms of digital transformation, creating more opportunities for IT services & support firms
CRM integration with other systems and software is more important than ever in the age of customer retention
Cybersecurity and IT security solutions coveted by acquirers to guard against vulnerabilities
European targets being acquired by more local acquirers
Outsourcing is being pushed forward by trends such as AI and automation
Better connectivity leading to more demand for outsourced payment processing and software development
- For more insights attend the Hampleton webinar on September 15 covering technology M&A and positioning businesses for sale in 2020 details:
