Market Spotlight: IT Services Webinar
•Download as PPTX, PDF•
1 like•475 views
M&A in the IT Services sector has traditionally been relatively slow and far lower values than the rest of the high flying tech sector. Today, deal flow is accelerating for the services companies with the right profile. Does your company match that profile? What are buyers looking for when it comes to acquiring an IT services company? What factor does target market play? What about geography? This Market Spotlight webcast brings together buyers, sellers, bankers and investors to answer these questions and more.
Recommended
Recommended
More Related Content
Similar to Market Spotlight: IT Services Webinar
Similar to Market Spotlight: IT Services Webinar (20)
More from World Financial Symposiums
More from World Financial Symposiums (10)
Recently uploaded
Recently uploaded (20)
Market Spotlight: IT Services Webinar
- 1. IT Services Webinar March 31st
- 2. World Financial Symposiums WFS is an international organization dedicated to educating technology leaders through monthly, Market Spotlight webcasts and day-long Growth and Exit Strategies for Software and IT Companies conferences. www.wfs.com
- 3. Nat Burgess - Moderator Nat joined Corum in 1996 and brings a diverse background in technology M&A and law. While with the Enforcement Division of the U.S. Securities and Exchange Commission, Nat helped identify and build cases against securities fraud schemes. With the Strategic Development Division of Morgan Stanley's M&A group, Nat worked on cross-border acquisitions of U.S. and European companies by Japanese firms, and on financings by large Japanese public companies. Nat moved to Morgan Stanley's Tokyo office, where he reported directly to the President of Morgan Stanley, Japan Ltd. and focused exclusively on cross-border M&A. After Morgan Stanley, Nat co-founded Postcard Software, a creator of advertiser-driven bilingual (English and Japanese) Internet content. At Activision, Nat led the company's on-line business development. Nat earned an undergraduate degree in Japanese literature from Yale College and a law degree from UCLA. While in law school, Nat wrote articles for the International Forum at Yale, Tokyo Journal.
- 4. Agenda • WFS Welcome • Justine Ruan, Marketing Assistant – WFS • Moderator Introduction • Nat Burgess, President – Corum Group • IT Services M&A Report • Alina Soltys, Associate – Corum Group • Yasmin Khodamoradi, Jr. Research Analyst – Corum Group • Attributes of an Attractive IT Services Company • Nat Burgess, President – Corum Group • 5 Challenges to Selling a IT Services Business • Rahul Bhandari, Senior Director – Corum Group • Fireside Chat • Ray Makela, Managing Director – Sales Readiness Group • Q&A
- 5. Evolution of IT Technology
- 9. Growth of IT Services Employment NASDAQ Composite
- 10. Notable IT Services Deals
- 11. IT Services Research Report Alina Soltys joined Corum Group in 2010, located out of their Seattle headquarters assisting on the transaction side. As an associate, she focuses on strategic positioning, growth opportunity development and financial analysis as well as speaking regularly at conferences such as Casual Connect and WFS. Previously she worked on the buy side at a boutique real estate development firm focused on multi-family acquisitions as well as interning in the Mergers and Acquisitions Group at Colliers International. Alina graduated from the Foster School of Business at the University of Washington with honors, specializing in Finance and Entrepreneurship. Alina Soltys Associate Yasmin Khodamoradi Analyst Yasmin Khodamoradi joined Corum Group in 2015 as a junior research analyst. Previously she worked as a finance and operations coordinator at a technology startup and provided writing consultation services to an institutional investing advisory firm. Yasmin graduated from the Foster School of Business at the University of Washington, specializing in Finance and International Business.
- 12. SaaS 11.58x – 51.25x Scalability (EV/S) Efficiency (EV/EBITDA) High Value Specialization Growth, Execution Commodity Market Opportunity 0 0 0 ∞ ∞ ∞ SaaS 2.60x – 8.25x Software 2.00x – 7.25x IT Services 0.4x - 1.40x Software 10.00x – 24.40x Valuation Matrix IT Services 6.40x – 13.40x Source: The 451 Group; comprises of 2 years of data.
- 13. SaaS 11.58x – 51.25x Scalability (EV/S) Efficiency (EV/EBITDA) High Value Specialization Growth, Execution Commodity Market Opportunity 0 0 0 ∞ ∞ ∞ SaaS 2.60x – 8.25x Software 2.00x – 7.25x IT Services 0.4x - 1.40x Software 10.00x – 24.40x Valuation Matrix IT Services 6.40x – 13.40x Source: The 451 Group; comprises of 2 years of data.
- 14. Utilization Rate (%) 0 ∞ 75%+ 60 – 75% <60% Scalability (Revenue Growth %) 0 ∞ 15% + 5% -15% <5% Drivers of Valuations for IT Services Companies Operating Efficiency (Gross Margin %) 0 ∞25% - 35% < 25% 35%+ <$150k $150k -$250k $250k+ Revenue Per Employee ($) 0 ∞
- 15. Utilization Rate (%) 0 ∞ 75%+ 60 – 75% <60% Scalability (Revenue Growth %) 0 ∞ 15% + 5% -15% <5% Drivers of Valuations for IT Services Companies Operating Efficiency (Gross Margin %) 0 ∞25% - 35% < 25% 35%+ <$150k $150k -$250k $250k+ Revenue Per Employee ($) 0 ∞
- 16. Utilization Rate (%) 0 ∞ 75%+ 60 – 75% <60% Scalability (Revenue Growth %) 0 ∞ 15% + 5% -15% <5% Drivers of Valuations for IT Services Companies Operating Efficiency (Gross Margin %) 0 ∞25% - 35% < 25% 35%+ <$150k $150k -$250k $250k+ Revenue Per Employee ($) 0 ∞
- 17. Utilization Rate (%) 0 ∞ 75%+ 60 – 75% <60% Scalability (Revenue Growth %) 0 ∞ 15% + 5% -15% <5% Drivers of Valuations for IT Services Companies Operating Efficiency (Gross Margin %) 0 ∞25% - 35% < 25% 35%+ <$150k $150k -$250k $250k+ Revenue Per Employee ($) 0 ∞
- 18. Developed Markets: IT Services Peer Group 0.40 x 0.50 x 0.60 x 0.70 x 0.80 x 0.90 x 1.00 x 5.00 x 6.00 x 7.00 x 8.00 x 9.00 x 10.00 x 11.00 x EV/SEV/EBITDA Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 EV/EBITDA 9.00 x 8.56 x 8.64 x 8.77 x 8.40 x 8.54 x 8.41 x 8.42 x 8.34 x 8.64 x 8.75 x 9.45 x 9.81 x EV/S 0.82 x 0.82 x 0.78 x 0.80 x 0.77 x 0.81 x 0.79 x 0.81 x 0.77 x 0.82 x 0.80 x 0.80 x 0.89 x
- 19. Emerging Markets: IT Services Peer Group 0.40 x 0.90 x 1.40 x 1.90 x 2.40 x 2.90 x 3.40 x 5.00 x 7.00 x 9.00 x 11.00 x 13.00 x 15.00 x 17.00 x 19.00 x EV/SEV/EBITDA Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 EV/EBITDA 14.26 x 11.71 x 12.16 x 11.79 x 12.15 x 12.81 x 13.44 x 13.82 x 15.07 x 17.15 x 17.84 x 13.37 x 15.09 x EV/S 2.78 x 2.32 x 2.17 x 2.76 x 2.77 x 2.26 x 2.15 x 2.44 x 2.43 x 2.72 x 2.76 x 2.40 x 2.81 x
- 20. IT Services Market Cap by Region *As of March 27th 2015 758 261 145 30 4 $0 $100 $200 $300 $400 $500 $600 $700 $800 US & Canada Asia/Pacific Europe Latin America & Caribbean Africa & Middle East IT Services Market Cap by Region* ($B)
- 21. North America Total transactions volume 372 Total transactions value $13 636m Europe Total transactions volume 352 Total transactions value $7 014m Latin America Total transactions volume 38 Total transactions value $606m Mideast / Africa Total transactions volume 39 Total transactions value $380m Asia / Pacific Total transactions volume 236 Total transactions value $5 105m Source: CapitalIQ
- 22. 36% 34% 23% 4% 3% IT Services M&A Volume 2014 United States and Canada Europe Asia / Pacific Africa / Middle East Latin America and Caribbean 1037 deals 51% 26% 19% 2% 2% IT Services M&A Value 2014 ($B) United States and Canada Europe Asia / Pacific Africa / Middle East Latin America and Caribbean $26.7B M&A Data by Geography
- 23. IT Services M&A Activity : Annual 2008-2014 924 736 930 968 950 931 1037 0 200 400 600 800 1000 1200 $0 $5 $10 $15 $20 $25 $30 $35 $40 2008 2009 2010 2011 2012 2013 2014 Global IT Services M&A Values ($B) and Volumes Total Disclosed Deal Value ($BB) Total Number of Transactions Source: Capital IQ
- 24. 924 736 930 968 950 931 1037 0 200 400 600 800 1000 1200 $0 $5 $10 $15 $20 $25 $30 $35 $40 2008 2009 2010 2011 2012 2013 2014 Global IT Services M&A Values ($B) and Volumes Total Disclosed Deal Value ($BB) Total Number of Transactions Source: Capital IQ, 451 3032 3030 3294 3796 3647 3284 3935 0 500 1000 1500 2000 2500 3000 3500 4000 4500 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 2008 2009 2010 2011 2012 2013 2014 Billions Tech M&A Values [$B] and Volumes Sum of Total Deal Amt. Count of Target
- 25. Top 10 IT Services Buyers (2014) 0 1 2 3 4 5 Accenture Hitachi Atos EPAM Systems, Inc. Iron Mountain Inc. UST Global Inc. Winxnet, Inc Perficient TIVIT Telstra Most Active Buyers by Number of Transactions Source: Capital IQ
- 26. 2013-2014 M&A Deal Flow by Transaction Size
- 27. IT Services: Developed Markets Deal Spotlight Sold to Target: Xerox Acquirer: Atos SE [France] Transaction Value: $1.1 billion - IT outsourcing business assets of Xerox. - Increases focus on its BPO and document outsourcing businesses within its services segment.
- 28. IT Services: Developed Markets Deal Spotlight Sold to Target: FishNet Security Acquirer: Accuvant (Blackstone Group) Transaction Value: $350 million - Information security solutions that combine technology, services, support and training. - First deal done after Blackstone’s acquisition of Accuvant.
- 29. IT Services: Emerging Markets Deal Spotlight Sold to Target: CTIS Technologia [Brazil] Acquirer: Sonda SA [Chile] Transaction Value: $170 million - Outsourcing focused on business processes and application management, infrastructure support, service desk, and print outsourcing. - Will boost operations in Latin America’s largest IT market.
- 30. IT Services: Emerging Markets Deal Spotlight Sold to Target: Aditi Technologies [India] Acquirer: Symphony Teleca Corp. Transaction Value: Undisclosed - Outsourced, cloud and mobile software development and testing services, system migration and consulting services. - Will focus on Symphony’s “Systems of Engagement”, applying cloud, mobility and analytics.
- 31. IT Services: Recent Deals Deal Spotlight Sold to Target: Scitor Corporation Acquirer: SAIC Transaction Value: $790 Million - Systems, network and cybersecurity engineering, integration and related ICT management consulting services primarily for federal, state and local government agencies, the Department of Defense and intelligence sector. - Will expand classified contracts within the intelligence sector.
- 32. Nat Burgess - Moderator Nat joined Corum in 1996 and brings a diverse background in technology M&A and law. While with the Enforcement Division of the U.S. Securities and Exchange Commission, Nat helped identify and build cases against securities fraud schemes. With the Strategic Development Division of Morgan Stanley's M&A group, Nat worked on cross-border acquisitions of U.S. and European companies by Japanese firms, and on financings by large Japanese public companies. Nat moved to Morgan Stanley's Tokyo office, where he reported directly to the President of Morgan Stanley, Japan Ltd. and focused exclusively on cross-border M&A. After Morgan Stanley, Nat co-founded Postcard Software, a creator of advertiser-driven bilingual (English and Japanese) Internet content. At Activision, Nat led the company's on-line business development. Nat earned an undergraduate degree in Japanese literature from Yale College and a law degree from UCLA. While in law school, Nat wrote articles for the International Forum at Yale, Tokyo Journal.
- 33. Regions Expected to Drive M&A Source: KPMG 2015 M&A Outlook Survey [technology]
- 34. Market Segments Expected to Drive M&A Source: Ernst & Young Global Technology M&A Update
- 35. Attributes of an Attractive IT Services Company
- 36. Rahul Bhandari Managing Director – Corum Group In his long experience in technology, Rahul has worked in a variety of management, operational, and technical positions directly with government agencies, Fortune 500 and international companies in the US, Canada, Australia, Europe and India. Rahul led a Data Analytics and Business Intelligence firm from zero revenue into a highly successful company during economically challenged times. One of several firms to win the $60B US Navy and $4B DoD contracts. He was the Co-Founder and Vice President of Accenture Ventures, a $1B corporate VC fund and global incubator, where he was investor, adviser and board member to a portfolio of internet companies. Rahul established and led the M&A business integration group at Thomson Publishing; Thomson Corporation acquired Reuters creating Thomson Reuters valued at over $26B. Rahul also founded and led the Advance Technology Group at DynCorp to provide system integration solutions to healthcare clients. He was also a Principal Consultant at Oracle. Rahul attended senior executive programs at the Harvard and Stanford Business Schools. He is a graduate of the International Business and Leadership program, Georgetown Graduate School of Business. Rahul earned a BA in Computer Science and Business Administration from Northwestern College graduating in three years. Rahul previously held five Oracle Master Level certifications.
- 37. 5 Challenges to Selling a IT Services Business 1. Talent Retention 2. Low Valuations 3. Outsourcing 4. Integration Challenge 5. The Right Buyer
- 38. Fireside Chat Ray Makela Managing Director – Sales Readiness Group (SRG) Nat Burgess President – Corum Group
- 39. Ray Makela Managing Director – Sales Readiness Group (SRG) Ray Makela has over 20 years of management, consulting, and sales experience. He is an industry thought-leader who writes frequently on best practices for coaching and developing sales teams. Ray currently oversees all client engagements for Sales Readiness Group (SRG) as well as serves as a senior facilitator on sales management, coaching, negotiation and sales training workshops. Prior to Sales Readiness Group, Ray served as Chief Customer Officer (CCO) at Codesic Consulting where he was responsible for business development, managing customer relationships, and the development and implementation of Codesic's sales training initiatives. Ray has also held management positions at Accenture and Claremont Technology Group were he was a management consultant and trainer in the Change Management practice. He earned his B.A in Speech Communications from the University of Washington and an M.P.A. in Public Administration and Information Systems Management from the University of Southern California.
- 40. Q&A • We welcome your questions! • Use Q&A window on right side • Submit to queue at any time • Ask “all panelists” – see “ask” option above text-entry box
Editor's Notes
- Welcome to the WFS Market Spotlight presentation on IT Services M&A. If own or manage an IT Services business, you came to the right place. Today we will hear from Corum Research on IT Services trends, including recent M&A activity, valuation metrics, and trends, and a breakdown of the global distribution of IT Services M&A deals.
- My name is Nat Burgess. I have worked in mergers and acquisitions since 1989, and have specialized in software deals since 1994. The great promise of computers is that they would automate tasks. Moore’s law has given computers increasing power, and the growth of the Internet has increased their reach.
- From the early days of room-filling computers doing simple calculations on punchcards, through the mainframes and the minis and the micros, all the way up to today’s dense, super-powered data centers, computers have taken on more tasks every year. But ironically, automation did not put humans on the sidelines. Demand for services has increased annually every year since the dawn of computing.
- From the early days of room-filling computers doing simple calculations on punchcards, through the mainframes and the minis and the micros, all the way up to today’s dense, super-powered data centers, computers have taken on more tasks every year. But ironically, automation did not put humans on the sidelines. Demand for services has increased annually every year since the dawn of computing.
- From the early days of room-filling computers doing simple calculations on punchcards, through the mainframes and the minis and the micros, all the way up to today’s dense, super-powered data centers, computers have taken on more tasks every year. But ironically, automation did not put humans on the sidelines. Demand for services has increased annually every year since the dawn of computing.
- A 20 year chart of total employment in IT Services tells an interesting story. We see steady growth in the 1990’s, then a bump in 2000 when companies like Scient went through hyper-growth, only to crash down to earth a few years later. But overall the total number of people has increased, and the opportunities for entrepreneurs to build and harvest value have increased as well. I saw this demand myself when I co-founded a company that started out in software, but quickly transitioned into a services company at the request of business partners desperate for our help with their development projects. specialized in software deals since 1994. The great promise of computers is that they would automate tasks. Moore’s law has given computers increasing power, and the growth of the Internet has increased their reach. FLIP THROUGH HISTORY OF COMPUTING PICTURE SLIDES From the early days of room-filling computers doing simple calculations on punchcards, through the mainframes and the minis and the micros, all the way up to today’s dense, super-powered data centers, computers have taken on more tasks every year. But ironically, automation did not put humans on the sidelines. Demand for services has increased annually every year since the dawn of computing. GROWTH OF IT EMPLOYMENT OVER 20 YEARS SLIDE A 20 year chart of total employment in IT Services tells an interesting story. We see steady growth in the 1990’s, then a bump in 2000 when companies like Scient went through hyper-growth, only to crash down to earth a few years later. But overall the total number of people has increased, and the opportunities for entrepreneurs to build and harvest value have increased as well. I saw this demand myself when I co-founded a company that started out in software, but quickly transitioned into a services company at the request of business partners desperate for our help with their development projects. Since then I have worked on over 100 tech transactions, including several services deals. But recently we have put a new focus on IT Services, based on the trends that we are seeing, and some recent successful transactions.
- Thanks Nat, At the start of this webinar, , let’s take a look at the broad technology landscape before diving into the IT Services segment. The valuation matrix here does a good job of breaking out the components that are key drivers to value,,,,, even when applied with a broad stroke across the entire industry. The first two scales compare revenue and ebitda multiples found in 2 years worth of M&A transactions, showing ranges for the 1st quartile through the 3rd quartile and then further broken out between IT Services, Software and SaaS companies. The ability to scale quickly, leverage existing infrastructure, retain customers – all attributes of SaaS companies lends them the highest value in this regard – furthest on the right side. On the other side are IT Services companies that depend upon a less scalable resource – staff – that need to be deployed on new customer accounts. From a multiple perspective for IT Services M&A comp, the revenue ranges is 0.4x-1.4x and EBITDA multiples between 6.4x-13.40x.
- Looking further Beyond financial metrics, The X factor that drives additional valuation premiums is the specific market position and opportunity the company finds itself in. Those companies that are highly specialized, providing a service or solution that is in market demand,… find themselves towards the higher end of the range.
- Looking more specifically at value drivers of IT services, We created the following key indicators of value. These ranges are calculated from Publically traded companies. Beginning with Growth: this is a key consideration factor & Value Driver. Only a small portion of public firms growing over 15% a year, the right most range.. In fact, Forrester expects the IT services market in the US to grow at 6% this year. Now, comparing this to companies looking to be acquired, high growth is necessary…. Public Company’s main goal with acquisitions is growth and expansion.
- The next metric is the rate of efficiency as measured by gross margins. Our research shows that if gross margins are under 20%, don’t expect a valuation of over 1x Revenues.
- The firms that we’ve worked with utilization rates of 75% or higher – have made strong impressions on buyers. The strong mgmt. polices provide confidence during an M&A event.
- And lastly, revenue per employee is an important metric that conveys the effectiveness driven through each member of the team. To caveat, these are total employee counts. With the intention of providing valuable feedback for our attendees, the way we’ve organized this chart is to focus on the metrics on the right – this is the “attractive” terroritory to find yourself in
- Moving on towards the public peer groups, this is a view of monthly performance within the Developed Markets Peer Group – this includes North America, European and Japanese companies, We had a steady year in valuations with a nice increase in the last two months driving the latest multiples to 0.89x Revenue and 9.8x EBITDA Geographic differences drive quite a variance in valuations with a lot of new growth and lower costs seen in emerging markets, Public Peer Group includes: Accenture, Alten, Atos, Bechtle, CACI International, Capgemini, CGI Group, Cognizant Technology Solutions, Computer Sciences Corp, Leidos Holdings, NCI, Nomura, SAIC, Sopra Group,Tieto Oyj, Unisys Corporation
- Here we see almost a 3x higher revenue multiple value and 50% increase on the ebitda mutliple. As a comparison to the steady going rate of the developed markets, emerging have been much more volatile over the last 12 months. Over the November and December time frame, India’s election cycle brought in a new presidency, who has been received positively for his pro-business views,, causing a jump there. Soon thereafter, the Rupee neared lows against the dollars with a surprising rate cut in India, leading back to the shoot up. A lot of this variablity across valuations has been driven by outside forces like politics for this group.
- The market for publically traded IT services firms is found on the US stock exchange with about 65% of the total share and another 20% on the Asian exchanges. What this means for potential acquisitions is the strong cash stores coupled with shareholder duties to continue growing and expanding represents strong dealflow coming out of the West.
- This in turn has resulted in $13.6bn acquisitions originated from US in 2014. The European market represents almost as many transactions as North America but with consolidation on a smaller scale. Within Latin America, a lot of the local companies like Sonda and Cielo have been quite active building up within all of the major Latin American Countries.
- Another way to look at that data is to recognize about 3/4th the M&A value is in the Western Economies with 2/3 the deal volume. This is a very data rich presentation so we’ll make the slides available after today’s presentation for a deeper review.
- Turning now to the annual M&A activity tracked back to 2008 when we had hit a record of $35b in transactions; this last year in 2014 we ended up beating the total transaction count, recording over 1000 transactions. This tracks very closely to both public market performance as well as the broader tech M&A cycle with a strong rebound seen this year, 57% increase in total deal value YoY An important distringtion to note though, is the lagging effect IT Services has had agains the general M&A cycle
- An important distinction to note though, is the lagging effect IT Services has had against the general M&A cycle;; The below chart shows the strong outperformance and record year in 2014 had in the broader Tech M&A index. Meaning we expect another strong year for IT Services M&A activity , likely beating 2008 levels.
- The most active companies have acquired for the purposes of expanded offerings, new customers and teams of specialists. Both Accenture and Hitatchi were on the top here with 4 deals each in 2014. Accenture had reached out to acquire 2 oracle based services shops, plus a digital agency and a crm specialist. Meanwhile Epam with their heavy central and eastern European presence grew with 2 US based companies plus an Armenia company – 2 of the 3 focused on the healthcare sector. To continue growing its market share, Iron Mountain has moved into emerging territories acquiring a Brazilian, polish and Turkish company.
- This is an interesting view on the sizes of the targets. The vast majority of the deals are sub $50m, increasing slightly between 2013 and 2014. Note, the scale change here so 2014 had 251 deals in the sub $50m range. The deals under $250m received a lot of influx and attention over the last two years as well with strong deal transaction. And lastly, looking @ the significant increase in billion dollar transactions, they contributed $14.4bn of the $26.7 bn in total deal spend in 2014! Yasmin, you’ve been looking at some recent transactions right>?
- In the developed markets, the biggest IT Services firms, having undergone significant domestic consolidation, are now looking for… growth internationally. French firm Atos acquired Xerox’s IT services arm for just over a billion, making them the largest European-based IT service provider and tripling their presence… ...in the US.
- IT security services and information security VARs were particularly popular, as highly publicized breaches in cybersecurity underscored its growing importance in the private and public sector. After being bought by PE Blackstone Group earlier in the year for $225 million, the network IT security company Accuvant… announced its own cybersecurity purchase with the acquisition of FishNet Consulting, an information security solutions provider, combining two of the largest security companies.
- In emerging markets, companies are maturing and growth is crucial. In Chile IT services firm Sonda paid 170 million for Brazilian provider CTIS, expanding its reach into Latin American countries with high growth prospects.
- In India, cloud development services and consulting firm Aditi Technologies was acquired by Symphony Teleca, becoming its fifth division, focused on what Symphony calls “Systems of Engagement” applying cloud, mobility, and analytics.
- And the latest deal is further example of consolidation, this time in the Government Space with SAIC purchasing Scitor for $790m; a 1.3x Sales multiple and 10.6x EBITDA multiple. According to SAIC, Scitor’s classified contracts within the intelligence sector plus Air Force Contracts coupled with limited integration risk are synergistic strengths. >>>> Alina >>> That wraps up the IT Services research report, back to you NAT.
- -For overall tech M&A, the focus is on North America. When asked where they would make acquisitions, 73% of global CEOs chose the US. However, only 51% of the dollar volume in IT Services M&A was in the US. -Gartner claims that the demand for IT Services is growing 3% annually. We think the growth in demand in 2015 will be over 15%. Try hiring technical talent in Silicon Valley and you will understand how valuable these resources have become. But the value of tech expertise is growing globally, not just in the US, velocity of the M&A market globally will continue to increase.
- Buyers want scale, and they want high-value specialization. Consolidation is one clue to the puzzle. If we look at the market segments that are consolidating the most rapidly, at the highest valuation, we see mobility, cloud and SAAS at the top of the charts, both in terms of number of deals, and value of deals. So it is no surprise that services companies focused on these areas have a high value.