Rapid shift to online puts IT business services on the frontline, says Hampleton Partners' M&A report

The latest IT & Business Services M&A market report from Hampleton Partners, an international technology M&A adviser, reveals how Covid-19 is putting the IT sector on the frontline despite the pandemic’s impact on deal volumes and valuations, with IT departments and suppliers remaining crucial in the shift of entire companies online and in the e-commerce boom. 

In the first half of 2020, transaction volume dipped to 378 deals, compared to the 416 deals recorded during the second half of 2019.

Along with the number of deals, some valuation multiples came in lower: the trailing 30-month median EBITDA multiple dropped to 9x – the lowest in four years – while the revenue multiple remained stable at 1.2x.

Miro Parizek, founding partner, Hampleton Partners, says: “So far in 2020, the IT & Business Services sector has seen stable M&A activity. Lockdown measures around the world have accelerated the move to digital, providing ample opportunity for IT players to shine if they can digitise products, processes and services.

“At the same time, valuations have come in somewhat lower and deal-making was more regionally oriented, especially in Q2, as global travel was impacted by travel restrictions. 

“Unsurprisingly, outsourcing companies, which offer services ranging from payment processing to software development, continue to enjoy strong growth on the back of improved global connectivity and the ever present need to reduce costs.”

Companies in the IT Outsourced Services segment continued to attract the highest valuations - 9.7x trailing 30-month median EBITDA multiple.  The Tech Services & Support segment accounted for 44 per cent of deals, the largest in the IT & Business Services sector.