Introduction: Technology Services Sector Themes
Private Equity players remain active in the middle-market despite economic headwinds in the broader economy. Industry consolidation remains a key theme, with platform and add-on acquisitions fueling inorganic expansion.
Technology Services Summary
- Strategic and financial buyers remain active in the Technology Services space, investing in key industry themes including Digital Transformation, Cloud Enablement, Data & Analytics, Cybersecurity, and Managed Services
- The market continues to reward high-quality companies with attractive exit opportunities and premium valuations
Key Industry Drivers: Private Equity Roll-ups
- Private Equity (‘PE’) investment in the Technology Services sector remains robust, with over 100 deals announced per quarter, on average
- Hundreds of PE sponsors have emerged having Technology Services as a core investment thesis
Technology Services M&A Themes (Q1’23)
- Economic headwinds and fears of a recession have not slowed consolidation in the Technology Services sector
- M&A activity in Technology Services rebounded in Q1 from Q4 levels, increasing 14.1%, to 396 deals in the quarter
Public Market Valuation Trends & Drivers
- Valuation multiples (EV / LTM EBITDA) of publicly-traded Technology Services companies have compressed over the past year
- Median multiples have declined from 18.2x at the end of Q1’22 to 14.5x at the end of Q1’23
- Multiples have held more or less steady over the past quarter (e.g., relative to Q4’22)
- Publicly-traded Technology Services share prices have appreciated modestly thus far in 2023 (+1.9%)
A Number of Private Equity Players are Driving M&A in Technology Services
- KPMG has compiled a list of selected Private Equity firms in the Technology Services ecosystem, outlined on page 27+
