Private Equity median deal size hit $556 million in 2019, 1500 percent more than that of strategic buyers
London, UK – 10 March 2020. The latest IT & Business Services M&A market report from Hampleton Partners, the international technology mergers and acquisitions advisor, outlines how low interest rates and favourable debt markets have made it easier for private equity firms to pick up market-leading IT businesses. PE buyers have grown their share of the sector’s M&A activity to 15 per cent of all transactions in 2019, compared to just under five percent in 2014.
PE firms armed with record amounts of capital are making big investments in the nine - or ten-digit range pushing up median deal sizes.
In 2018, the median deal size for strategic buyer was only $28 million, whereas private equity median deal size was $196 million – 600 per cent more. This rift has continued to grow: in 2019, the strategic median deal size was $34 million, while the PE median deal size was $556 million – a whopping 1500 per cent more.
In total, $14.67 billion was spent by private equity buyers in 2019 – an increase from the $11.85 billion spent in 2018.
Miro Parizek, founding partner, Hampleton Partners, said:
“The migration of core business services to digital and to the cloud, plus widespread implementation of analytics, digital marketing, machine learning, social commerce and more, are creating a strong demand for companies across the sector.
“Macroeconomic forces are also contributing to M&A activity, as private equity firms can now afford to buy market-leading tech companies with high growth potential, leading to larger deal sizes.”
The outsized influence of private equity firms is shown by the $5.4 billion purchase of electronics distributor Tech Data by Apollo Global Management in November 2019.
Hampleton reported 407 IT & Business Services transactions in the second half of 2019, up from 380 in the first half of the year.
Companies in the IT Outsourced Services segment attracted the highest valuations, with trailing 30-month median multiples hitting a five-year high at 10.6x compared to 8.2x in the Integration Services segment.
IT & Business Services M&A 2020
Miro Parizek continued:
“At the end of 2018, we predicted that private equity interest would continue to grow. It has – now peaking at over 15 per cent share of deals.
“However, we believe this trend may slow down, as acquisitive PEs consolidate their position in the IT Services sector. Many have purchased several, somewhat related IT Services companies and must now deal with consolidation and integration in order to harvest some of the value in their thesis, beyond building a larger holding sharing a logo.”
Hampleton’s IT & Business Services M&A report analyses transactions, trends and activity across the Integration, Technology and Support Services segments as well as IT Outsourcing.
Note to Editors:
Hampleton Partners’ M&A Market Reports are compiled using data and information from the 451 Research database (www.451research.com); Crunchbase; and CapitalIQ, a product of S&P Global.
Download the full Hampleton Partners’ IT & Business Services M&A Market Report 1H2020: https://www.hampletonpartners.com/reports/it-business-services-report/
About Hampleton Partners
Hampleton Partners is at the forefront of international mergers and acquisitions and corporate finance advisory for companies with technology at their core. Hampleton’s experienced deal makers have built, bought and sold over 100 fast-growing tech businesses and provide hands-on expertise and unrivalled advice to tech entrepreneurs and companies which are looking to accelerate growth and maximise value.
With offices in London, Frankfurt, Stockholm and San Francisco, Hampleton offers a global perspective with sector expertise in: Artificial Intelligence, Autotech, Cybersecurity, Digital Commerce, Enterprise Software, Fintech, Healthtech, HR Tech, Insurtech and IT & Business Services.
For more information visit https://www.hampletonpartners.com.