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After the market contractions in 2023, the global M&A market roared back in 2024. The technology services sector was a central part of that comeback, with deal values reaching USD 28 Bn across fewer, larger deals.
Rising interest rates and geopolitical uncertainty had frozen the M&A landscape in 2023, plunging deal values to their lowest point in a decade. Tech services, which had seen a staggering USD 61 Bn in deals during 2021’s post-pandemic frenzy, scaled back to just USD 10 Bn in 2023.
What changed? Interest rates came back down, bringing predictability to debt cost. Private equity firms, sitting on mountains of dry powder, were eager to acquire and had the reserves needed to transact large, attractive assets.
The result was a positive shift in Technology Services M&A deal dynamics. While the number of transactions remained flat, deal sizes saw notable growth. Private equity led the charge, outpacing strategic buyers and accounting for 64% of total deal value—a sharp increase from 50% in 2020.
Valuation multiples remained elevated despite sluggish organic growth across the sector. This paradox had a simple explanation: only high-quality assets were changing hands. Owners of average-performing companies kept them off the market, waiting for like-for-like competition to resume, while buyers competed fiercely for the best performers.
Three segments dominated the action: Managed Services Providers (MSPs), Data & Analytics firms, and Cloud Services players.
MSPs, with their sticky customer relationships and predictable subscription revenues, proved irresistible to Investors looking to build larger platforms through consolidation in a highly fragmented market. Transactions like Omers’ acquisition of Integris and One Equity Partners’ purchase of Yorktel exemplified this trend.
Meanwhile, AI’s meteoric rise elevated Data & Analytics companies into must-have assets. With the exponential growth of data, related assets became increasingly attractive targets. Approximately 15% of all tech services acquisitions in 2024 targeted data and AI capabilities.
Cloud firms completed the trifecta, serving as the foundation for digital operations and the infrastructure underpinning AI deployments. Notable deals included CD&R’s staggering USD 4 Bn acquisition of Presidio and Insight’s USD 940 Mn purchase of Google Cloud partner SADA.
Looking ahead to 2025, several factors promise to sustain this momentum. PE portfolio companies from the 2020-2021 investment cycle are approaching the typical exit window. Undervalued public markets in the US and Europe create opportunities for take-private transactions. And strategic buyers, struggling with lackluster organic growth, increasingly view acquisitions as their path to expansion.
But perhaps most intriguing is how AI could fundamentally reshape the sector. Our report, ‘What 2024 Tells Us About The Road Ahead For Technology Services M&A,’ highlights how, as AI’s impact on Tech Services unfolds over the next decade, the benefits of scale will start to shrink. This shift will redefine profit pools and transform commercial models for technology services companies across the spectrum.
This suggests that traditional metrics for evaluating tech services firms may soon become obsolete—a sobering thought for investors who’ve spent decades perfecting their current approaches.
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