News and Research

M&A Update – Data Analytics IT Consulting

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September 2022 – Solganick & Co. has published its latest M&A update on the data analytics IT consulting sector.  

Download the full report here: Solganick Co. Data Analytics Mergers Update Q2 2022

 

Here are the key highlights:

  • Despite a challenging macroeconomic environment through Q2 2022, we are continuing to see strong buyer demand for quality assets within the Data Analytics IT Consulting sector.
  • The Big Data Consulting Market is forecast to reach $4.2 billion by 2026, growing at a CAGR of 32.3% from 2021 to 2026, according to IndustryARC research.
    Data Analytics IT Consulting has been a large area of focus for Solganick & Co., and through both
    recently closed transactions as well as opportunities currently in market, valuation multiples and deal
    terms have been favorable to sellers.
  • Both Financial Sponsors and Strategic Buyers are looking to set themselves up for growth beyond the
    next few quarters, thus we are not seeing the same valuation decay for privately-held companies as what has occurred recently in public markets.
  • Access to top-tier talent in the IT consulting sector remains highly competitive for large and small companies alike. Certain skill sets and capabilities such as Data Analytics, DevOps, Cybersecurity,
    Managed Services, and Public Cloud (AWS, Azure, and Google Cloud) are in high demand.
  • Enterprise application partner ecosystems continue to consolidate at a rapid pace; areas of interest continue to be
    on Snowflake, Databricks, Qlik, Informatica, Tableau, DBT, Fivetran, Salesforce, Public Cloud (AWS, Azure, and GCP), ServiceNow, SAP, among others.
 

Valuation, Q2 2022

Solganick reported that the range of valuation for Data Analytics IT Consulting Firms was the following:

  • LTM Enterprise Value to Revenue (EV/Revenue): 2.0x to 3.3x+
  • LTM Enterprise Value to EBITDA (EV/EBITDA): 8x to 14.5x+
  • Note/Example: The type and quality of work provided by the seller drive valuation. For example, a Snowflake partner that is growing 40% per year and has strong gross profit and EBITDA margins will likely obtain a higher EV/Revenue multiple.
  • Deal Strucure: Cash paid at close is a majority of deal structure, followed by equity and/or earnout. I.E. – 80% cash, 20% equity or earnout.
 

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Solganick & Co. is one of the most active boutique M&A advisory firms focused in IT Services and has
developed significant deal experience and relationships with strategic and financial buyers globally. Please contact us for more information.

    Frequently Asked Questions

    1 What are the current M&A trends in the data analytics IT consulting sector?

    Despite a challenging macroeconomic environment in Q2 2022, there is strong buyer demand for quality assets within the Data Analytics IT Consulting sector. Both Financial Sponsors and Strategic Buyers are actively seeking to position themselves for growth beyond the next few quarters.

    2 What are the typical valuation multiples for Data Analytics IT Consulting firms?

    For Q2 2022, Solganick reported valuation ranges of 2.0x to 3.3x+ LTM Enterprise Value to Revenue (EV/Revenue) and 8x to 14.5x+ LTM Enterprise Value to EBITDA (EV/EBITDA). Valuation is influenced by the type and quality of work, with high-growth partners like Snowflake specialists potentially achieving higher multiples.

    3 What is the growth forecast for the Big Data Consulting Market?

    According to IndustryARC research, the Big Data Consulting Market is forecast to reach $4.2 billion by 2026. This represents a significant compound annual growth rate (CAGR) of 32.3% from 2021 to 2026.

    4 What are the common deal structures for M&A transactions in this sector?

    Deal structures typically involve cash paid at close as the majority component, often followed by equity and/or earnout. For example, a common structure might be 80% cash and 20% equity or earnout.