8 | | MAY 2021IN MY OPINIONMERGERS, ACQUISITIONS AND THE EVOLUTION OF IT MANAGED SERVICESBy Jonathan Simnett, Director, Hampleton PartnersTrying to predict the future is a notoriously tricky thing to do, no more so in the volatile world of IT and the managed services and integration business that deliver the systems on which end users run their organisations. But the surest way to measure real change and spot emerging technological trends in these areas is to track the mergers and acquisitions (M&A) activity that is taking place within the sector.As technology such as big data analytics, cloud computing and internet of things continue to infiltrate IT and managed services, a wave of consolidation is being driven by companies of all hues seeking to stay ahead of the curve.Overall, in the second half of 2018, acquirers included incumbent tech companies pursuing transformation and consolidation opportunities, conglomerates seeking growth through investment and smaller firms looking to expand their geographic reach in response to political and economic turmoil.Software outsourcing companies, digital marketing firms and companies offering cloud and SaaS solutions have proven particularly popular with strategic buyers, public sector-serving firms and private equity investors over the last few years.So, what has been happening in three subsectors of IT and managed services - integration services, IT outsourced services and tech services and support - across the second half of 2018?Integration Services Total transaction volume in the Integration Services segment remained steady, with trailing 30-month multiple lingering around 0.9 x EV/S (Enterprise value divided by sales valuation metric) and just under10 x EV/EBITDA (Enterprise value divided by earnings before interest, tax, depreciation and amortisation valuation metric), with little to no difference compared to previous periods.Nevertheless, integration services proved particularly popular with public sector organisations and providers to government agencies and, in the segments largest disclosed deal, Japanese systems software corporation NEC acquired Denmark based KMD, a provider of IT outsourcing and software development, systems and security integration for government and social services agencies, for $1.22 billion.
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