The IT Services Industry and M&A

Information Technology (IT) services encapsulate maintenance and security with regard toonsite and remote tech support,infrastructure, computers, servers, networks, workstations,firewalls, cloud services, web development, systems integration, telecom, patch management, software updates, big data, and virus and malware prevention.

The outsourcing of these services allows companies to easily access technical expertise without taking on additional staff and fixed costs, especially in cases when companies need talent that is not readily available internally or locally. Outsourcing can also alleviate pressure and save time for a company’s existing in-house IT staff. 

The growing global IT services market is expected to reach $1.2 trillion by the end of 2025. The world's largest market for this industry is North America, followed by Europe and then Japan. 

M&A Solutions

As technological advances continue to infiltrate and improve all industries, companies look to consolidation to stay current, relevant and competitive. Many businesses are opting to buy rather than build, acquiring companies versus recruiting new staff. Increased demand for talent also pushes companies to outsource their tech and compete over acquisitions.

Mergers and acquisitions in the IT services industry see increased activity when:

• The industry outlook is positive
• There are more buyers in the market
• Buyers have access to sufficient funds for acquisitions
• Acquisitions seem to be a better option than organic growth
• Target company earnings are at high enough levels to merit a price that meets their goals
• Buyers are willing to pay a substantial amount of cash at close

Strategic buyers, private equity, and public firms are particularly interested in software outsourcing companies that offer cloud and software-as-a-service (SaaS) solutions. When it comes to M&A in this sector, incumbent technology companies need consolidation opportunities, large organizations need growth through investment, and smaller firms need to expand their geographic reach. Smaller companies with high-value specializations and regional companies with scale remain in global demand.

A high level of buyer interest in cloud software and services is also a major driver of M&A activity in the IT services industry across all sizes and spectrums of the market. Additionally, as cybersecurity is a major priority in the highly digitized environment of the 21^stcentury, there are significant opportunities for the raising of capital and completion of transactions between companies that operate in this space.

As we see continued changes in technology, the introduction of new technologies, and increases in global overall IT spending, the IT services sector is destined to see an increased prevalence of M&A interest and transactions.

IT Due Diligence

IT due diligence is utilized for a comprehensive evaluation of the Total Cost of Ownership (TCO) of a company’s IT infrastructure, as well as any risk associated with any future M&A transactions. The process includes the assessment of:

• The company’s standards, inventory and systems
• All databases and applications
• Current IT support services and vendor operations
• The company’s structure and its impact on its core business activities

While the due diligence process can take quite some time, it is well worth the work and the wait because it ensures better outcomes and satisfied parties on both sides of a deal.

Enlist M&A Expertise

When selling your IT services company, it is critical to maximizing your company value that you choose the right buyer and exit at the right time. While you may be an expert when it comes to your specific industry, you are likely not an expert at valuating and selling a business. The right M&A advisory firm can provide the specialized knowledge of the intricacies of acquisitions that will be a complete game changer in making a deal. They can also identify quality companies not being offered on the market and provide insider knowledge that can offer major advantages in negotiations. The earlier in the process that you engage expert M&A guidance, the better off your deal process will be.

Contact Us

At Benchmark International, we understand that selling your company or exiting your business can be both exciting and a little stressful. Count on our M&A experts to guide you through every step of the transaction and make you feel at ease that you are going to get the best deal possible. We use proprietary processes with best practices and worldwide connections to generate exceptional results. Contact us to get the process started.