April 25, 2016 – Solganick & Co. has issued its latest Q1 2016 M&A update for the IT services, cloud and managed services industry sectors. The following summarizes the key highlights in the report:


United States M&A Activity, Q1 2016

Within the United States, deal activity also showed signs of cooling down in the first quarter of 2016. 1,007 deals worth a total of$241.5 bn was recorded during the period, down 33% compared to Q1 2015’s 1,250 deals worth $361.3 bn.
The US share in global M&A activity stood at 40.5%, down from 46.2% during the record year of 2015.


IT Services M&A Activity, Q1 2016


The median Implied Enterprise Value/Revenue (EV/R) and Implied Enterprise Value/EBITDA (EV/EBITDA) for the US IT Services, Cloud/Managed Services sectors were as follows:

Systems Integrators and IT Consulting: 1.1x and 10.2x
Cloud and Managed Services: 1.9x and 7.4x
IT Staffing: 0.3x and 9.0x
VAR’s: 0.2x and 7.0x



IT Services Companies Expand into Digital

IT Services companies are buying up digital agencies. The increase in mobile devices and social media by both companies and consumers has boosted the value and the need for digital marketing agencies. While traditional agencies produce marketing and advertising campaigns for print, radio and television, digital agencies develop campaigns for websites, social media and mobile devices. The IT services and digital agency sub-sectors have been active on the M&A front, with several strategic buyers on the prowl for targets.

Among the strategic acquirers buying digital agencies are: IBM (NYSE: IBM), Web.com Group Inc. (Nasdaq: WEB), Accenture (NYSE: CAN), and Perficient (NASDAQ: PRFT). Buyers have been looking both in the U.S. and internationally for deals.


In February, IBM announced plans to acquire digital marketing agency Ecx.io, headquartered in Dusseldorf, Germany. The two companies say the deal comes during a time when customer service in e-commerce is crucial. Ecx.io serves clients such as fabrics distributor JAB Anstoetz. The move follows IBM’s pending purchases of digital marketers Aperto, based in Berlin, Germany, along with Resource/Ammirati in Columbus, Ohio. IBM has also been investing to grow its digital business organically. In 2016, the company opened design offices in Dubai, Prague and Warsaw.


Web.com has recently completed its purchase of Yodle Inc. for up to $342 million in cash. Yodle, based in New York, provides social media and search engine assistance to small businesses. Web.com in Jacksonville, Florida, offers website and online marketing services to businesses. The company says the purchase of Yodle will give it additional products, such as cloud-based software. “This market segment has been a strategic focus for us for several years,” says Web.com CEO David Brown. 

Perficient Inc. (Nasdaq: PRFT) launched a full-service, 200-person digital agency division to better meet the growing technology demands of chief marketing officers. It recently acquired digital marketing agencies Enlighten in December and Zeon Solutions the previous year. As online shopping and e-commerce keeps making gains with consumers and companies, M&A in digital advertising will rise along with it.


For more information and to download the complete report, go here: Solganick Co IT Services Cloud Managed Services MnA Update Q1 2016