The IT Services Industry in the UK
by Regent Evolution
The number of transactions in the IT services sector experienced a notable decline in 2023, dropping to 209 transactions from the previous year's 288. This decline may indicate various factors such as market consolidation, economic uncertainties, or shifting investor sentiments within the industry.
Analysing buyer types reveals a dominance of strategic buyers, constituting 89% of all acquisitions in 2023, with financial buyers making up the remaining 11%, although many of the strategic buyers were companies with Private Equity backing. This high proportion of strategic buyers suggests a focus on synergies, market expansion, or strategic positioning within the IT services landscape.
In terms of buyer locations, the distribution remained relatively stable compared to previous years, with a consistent 56% of acquirers hailing from the UK and the remaining 44% originating from overseas. This consistent distribution may indicate a balanced interest in acquisitions from both domestic and international entities, highlighting the global nature of the IT services market.
In conclusion, the deal landscape of the IT services industry in 2023 reflects a mixed picture of declining transaction volumes alongside shifting valuation metrics.
Despite fewer transactions, strategic acquisitions, both domestically and internationally, continued to drive substantial investment within the sector, underscoring its resilience and ongoing attractiveness to investors.
GCG member firm
Regent EvolutionLondon, UK
Dolf CampmanContact Dolf
The average deal value saw a downward trend over the years, dropping from £1,658m in 2020 to £209m in 2023. This decrease could be attributed to various factors such as market saturation, increased competition, or a shift towards smaller, niche acquisitions rather than large-scale deals.
Moreover, examining the valuation metrics reveals fluctuations in the TEV/Revenue and TEV/EBITDA multiples. While the median TEV/Revenue multiple saw a decrease from 2.3 in 2022 to 1.9 in 2023, indicating a potential re-evaluation of revenue multiples, while the median TEV/EBITDA multiple experienced a similar decline from 13.1 in 2022 to 10.4 in 2023.
Due to the low valuations of IT Services companies on the London Stock Exchange, there were a number of opportunistic offers to take listed companies private, some of which were met with significant shareholder resistance.
Examples are the takeover of Sopheon plc by Wellspring Worldwide Inc, which was completed (2024), and the offer for Kin and Carta by Apax Partners, which was met with considerable shareholder resistance and interrupted by a higher offer from Valtech.
Advised Supadü, the leading provider of website and e-commerce solutions for publishers, on its sale to Media Do, a Japanese publishing technology group listed on the Tokyo Stock Exchange. (2022)
Advised BTC Software, a multi-award-winning tax software solution, on its acquisition by Bright Software Group, a UK and Ireland-based accounting, practice management, and payroll software provider. (2022)
