Technology-Enabled Consulting Services M&A Transactions and Valuations

Between Q1 2020 and Q2 2024, $115 billion was deployed by acquirers in the technology-enable consulting services sector. Technology-enabled consulting services involve hiring external experts to provide strategic advice, management, and implementation of information technology solutions. These services help businesses optimize their IT infrastructure, enhance cybersecurity, and implement new technologies without maintaining an in-house IT department, offering cost-efficiency and specialized expertise.

Most transactions conducted and capital invested were by US and European-based acquirers. Additionally, strategic acquirers deployed over 75% of the capital invested. Median deal size and valuation multiples have steadily increased since Q3 2024, indicating an uptick in demand for acquisitions in the sector.
Technology-enabled consulting services company owners should be aware of exit opportunities presented by strategic acquirers from the US and Europe.
  • The valuation multiples are based on a sample set of publically listed outsourced IT consulting services companies and M&A transactions in the sector. The data were collected on July 4, 2024.
  • The sample set trades at an enterprise value to EBITDA multiple range of between 9x and 18x, with an increase in average multiples as the enterprise value increases.
  • Average enterprise value to revenue multiples ranged from 1x to 3x.
  • The median transaction size has ranged from a high of $16 million in Q3 2021 to a low of $3 million in Q2 2020. Median transaction size is a better indicator of the transaction activity than simple averages as this accounts for outliers and large transactions.
  • Median transaction size decreased by over 50% between Q4 2021 and Q3 2023. This corresponds to a period of increased interest rates and a downward trend in capital market activity. 
  • Q2 2024, and the two prior quarters, saw a notable increase in median transaction size, indicating an uptick in valuation and capital market activity.
  • Between Q3 2020 and Q2 2024, $115 billion was deployed across 2,150 technology-enabled consulting service acquisitions. The average transaction value was $54 million, highlighting the volume of transactions conducted in the middle and lower-middle markets.
  • The most significant deployment of capital, $17 billion, occurred in Q3 of 2022 with the largest deal count occurring in Q3 of 2021, 151 transactions.
  • There is a negative trend in the number of transactions conducted per quarter. However, capital investment has increased steadily since the start of 2023 with significant capital deployed in Q2 2024.
  • While the deal count shows variability, it remains above 100 deals per quarter, except for the significant drop in Q2 and Q3 2020. This consistency indicates a stable interest in deal-making, even as the investment amounts fluctuate.
  • Hitachi’s acquisition of GlobalLogic for $9.6 billion, completed on July 13, 2021, was the largest transaction in the sector.
  • Capital invested M&A transactions was dominated by strategic acquirers. They contributed 73% of all capital in the sectors while conducting 47% of all transactions.
  • Large strategic acquirers in the technology-enabled consulting service sector include Accenture, Deloitte, and Cognizant Technologies.
  • Private equity firms and other financial acquirers conducted 53% of M&A transactions and contributed 71% of capital deployed in the sector.
  • The most active financial acquirers in the sector include NewSpring Capital, General Atlantic, and Evergreen Services Group.
  • US-based technology-enabled consulting service acquirers dominated the capital invested, with over $75 billion across 39% of the deals in the category. This could be due to a variety of factors, including a large number of acquisition targets or demand for onshore or nearshore solutions due to disrupted supply chains and rising geopolitical tension. 
  • European acquirers contributed 40% of all M&A transactions in the sector but less than 30% of capital invested. This indicates an appetite for smaller transactions and significant activity in the low and middle markets. 
  • The rest of the world exhibits a noticeable spike in deal count, but an exceedingly small share of the capital invested. This implies a wide distribution of smaller deals across various countries not individually listed. These smaller markets collectively engage in a considerable number of technology-enabled consulting service transactions, but each deal tends to be small, reflecting diverse capital market activities.

Deal Spotlight:

MAVEN WAVE


The Company

Maven Wave is a Chicago-based management and technology consulting services company that offers cloud computing services, user experience, and design consultancy. Additionally, they provide big data and outsourcing consulting services to their clients, helping facilitate the shift to digitalization.
Atos intended to supplement its cloud solutions for applications, data analytics, and machine learning in hybrid and multi-cloud platforms through the acquisition.

The acquisition, valued at $189 million in cash, is rumored to include potential additional payments based on future sales milestones. For more information on how transaction structures impact seller liquidity, see Jahani and Associates’ article here.

Outsourced IT consulting services involve external experts providing strategic IT advice, management, and implementation, and helping businesses optimize technology infrastructure and cybersecurity without maintaining an in-house IT department.

Founders and shareholders of outsourced IT consulting services companies should be mindful of exit opportunities. Median transaction size has increased steadily in recent quarters and EBITDA multiple range of between 9x and 18x. The most active acquirers in the sector are strategic acquirers who contribute the majority of capital and deal flow and are mostly based in the US and Europe.

Sources: Pitchbook Data, Jahani and Associates (1), (2).