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Technology Services Mergers and Acquisitions Update – Q1 2024

IT services and technology services M&A report update Q1 2024

Solganick Technology Services M&A Update – Q1 2024 Final

April 25, 2024 – Los Angeles and Dallas – Solganick & Co. (“Solganick”) has issued its latest technology services industry sector mergers and acquistions (M&A) update report for Q1 2024.  The report covers subsectors including systems integrators/application partners, cloud computing, cybersecurity, data analytics, MSPs, and software development services and IT consulting companies.

Solganick is a data-driven investment bank that specializes in IT services and software companies and has advised on multiple M&A transactions within the covered sector verticals. Here are the highlights of the report:

  • Transaction volume and valuation multiples for technology services companies has remained solid during the first quarter of 2024, continuing to exceed pre-pandemic levels in aggregate. Strategic buyers were more active than financial buyers in 2023 which continued in Q1 2024, with companies including Accenture and Deloitte announcing transactions.
  • Solganick expects M&A deals to increase in the technology services sector for the remainder of 2024 and continuing into 2025.
  • Artificial Intelligence, data analytics, cloud computing, cybersecurity, and software development competencies are strongest in demand and are expected to remain key areas of interest for buyers during the remainder of the year. Demand for specialty IT consulting firms supporting application software platforms continues to be very strong, particularly for partners of applications supporting large and growing market opportunities (e.g., AWS, Google Cloud, Microsoft Azure, Snowflake, Databricks, ServiceNow, Salesforce and others).
Systems Integrators and Application Partners

  • The M&A market for application partners and systems integrators showed resilience in Q1 2024 compared to the broader M&A market.
  • Financial buyers, particularly private equity firms, have kept M&A volume afloat in the systems integration sector, accounting for 57.1% of all transactions through YTD. Private equity buyers have opted to acquire systems integration businesses almost exclusively through their established portfolio companies, or add-on’s.
  • In summary, private equity-backed consolidation and the shift towards integrated technology solutions drove deal activity and insulated the systems integration sector from the pressures of the broader M&A market.
  • The cybersecurity services M&A market remained stable in Q1 2024, despite a broader slowdown in the overall M&A market. Key points:
  • Cybersecurity M&A activity is expected to pick up through 2024 as a wave of sellers who have been sitting on the sidelines come to market.
  • In Q1 2024, there were many acquisitions of managed service providers (MSPs), cloud solutions providers, and solutions providers that serve the US Government
  • While overall cybersecurity venture funding declined 20% year-over-year in Q1 2024, funding surged in March, the final month of the quarter, indicating continued investor appetite
  • The cybersecurity services M&A market maintained its strength in Q1 2024, with consolidation activity, healthy valuations, and robust public market performance, despite a broader slowdown in the overall M&A landscape.
Data Analytics Consulting
  • The M&A market is seeing a slight rebound in 2024, with a shift towards smaller transactions rather than large megadeals. The data analytics sector, in particular, is anticipated to see an increase in M&A activity throughout the remainder of 2024 and into 2025, especially around emerging technologies like data analytics and generative AI software and consulting services. In our current and recent engagements, we are seeing particular interest for firms providing services in and around Snowflake, Databricks and other application partners within the data analytics ecosystem.
  • Notable M&A transactions in Q1 2024 include: Accenture’s acquisition of Impendi, Marlabs acquisition of OneBridge, and PE firm, CIVC Partners acquisition of datAvail, a consulting services firm focused on data analytics.
  • Note: Solganick has advised on the sale of three Snowflake Partners over the last 24 months; and advised on the sale of 4 additional data analytics firms.

Managed Services Providers (MSPs)

  • The managed services provider (MSP) industry saw strong M&A activity in Q1 2024.
  • The MSP industry “is in a rapid state of consolidation,” with more than 60 listed MSP transactions in the U.S. alone since January 2024.
  • Several aspects of the MSP business model, such as predictable revenue streams, strategic customer relationships, and scalable services, make MSPs an attractive investment for both larger IT service providers and financial investors.
  • Technology research firm, Canalys, expects MSP M&A activity to grow 50% in 2024, returning to 60% of 2021 levels, as the surge in cloud migrations, outsourced IT, and increasing cybersecurity complexity fuel demand.
  • The MSP industry saw a strong rebound in M&A activity in Q1 2024, with a high volume of transactions and experts predicting continued consolidation in the sector throughout the year.
Public Cloud Partners (AWS, Google, Microsoft, others)
  • Worldwide cloud infrastructure services spending grew 19% year-over-year in Q4 2023 to reach $73.7 billion, and is expected to grow 20% in 2024.
  • This indicates continued strong demand for cloud services.
  • The top 3 cloud providers – AWS, Microsoft Azure, and Google Cloud – jointly grew 21% in Q4 2023 and accounted for 66% of total cloud spending, suggesting that leading public cloud providers are continuing to see robust growth.
  • Several cloud partner M&A transactions were announced in Q1 2024, including ITC Infotech’s acquisition of Blazeclan, nClouds acquisition of Foghorn, and Insight Enterprises acquisition of top Google Cloud Partner of the Year, Sada (announced December 2023).
  • Solganick continues to see large global systems integrators and PE firms seek out acquisitions within the major public cloud partner ecosystem in 2024. AWS, Google Cloud, and Microsoft Azure are in the highest demand.
Software Development Services
  • The software development services market is expected to see increased M&A activity in 2024, driven by a few key trends:
  • Demand for Vertical SaaS Solutions: Vertical SaaS solutions, which address industry-specific challenges, are expected to generate more M&A interest than horizontal SaaS peers in 2024. This aligns with the growing need for tailored software solutions.
  • Shift to Profitability over Growth: The market is shifting away from “growth at all costs” to a focus on profitability. Acquirers are targeting software development firms with strong product technology, market fit, and healthy business models
  • Consolidation in Cloud, Analytics, IoT, and AI/ML: Software development firms will look to acquire critical technology capabilities in areas like cloud, analytics, IoT, and AI/ML to keep pace with evolving customer demands. Understanding and building AI applications is seen as critical for software development firms to stay competitive.
  • Transactions announced in Q1 2024 include Globant’s acquisition of Iteris and EPAM’s acquisition of Vates.
Publicly Traded Valuation Multiples and Tables are available in the report, here: Solganick Technology Services M&A Update – Q1 2024 Final
About Solganick & Co.
Solganick is a data-driven investment bank and mergers and acquisitions (M&A) advisory firm focused exclusively on software and IT services companies.  Formed in 2009, the company and its deal team has advised on multiple M&A transactions completed with Accenture, Atos, CapGemini, Stefanini IT Group, Sunstone Partners, Sheridan Capital Partners,  HCAP Partners, and several others. For more information, please contact us.

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