IT Services M&A is stabilizing, and asset interest across all buyer types remains significantly elevated – overall market sentiment is becoming more positive, and signs are pointing to an uptick in volumes 2H 2024.
Highlights from the report:
- IT Spend Recovering: Enterprise IT budgets appear to be opening back up after tightening through a period of high economic uncertainty and anxiety. The long-term outsourced services demand outlook is extremely favorable given ongoing IT talent shortages, fundamental cloud needs, and anticipated increased AI adoption.
- M&A Outlook Improving: High interest rates and inflation dampened deal flow in 2023, but M&A activity is still trending above pre-pandemic levels and valuations have firmed up, indicating very healthy acquisition demand. Managed Services Providers (MSPs), enterprise software consulting and implementation partners, and software development firms are top priorities for large consolidators and investors.
- Selectivity To Persist: Buyers are paying up for strategically-valuable, premium-profile IT services firms but continue to be judicious about asset selection and commitment, resulting in more exhaustive due diligence and deal structure (e.g., "earnout", "rollover", "holdback", and "escrow"). Recent successful outcomes have been highly contingent on confirming alignment between a target’s particular identity and the buyer's priorities and go-forward vision, which can make process discussions and negotiations more protracted.
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