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Unveiling the Dynamics of the Global Tech M&As Landscape in 2022 and Beyond - Blog 1
Unveiling the Dynamics of the Global Tech M&As Landscape in 2022 and Beyond - Blog 1

October 11, 2023

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This is the first blog in a three-part series detailing the global M&A landscape.

In the ever-evolving world of technology, the tech industry has been on a remarkable journey, with each year presenting new challenges and opportunities. A critical aspect of this landscape is the world of tech deals - mergers, acquisitions, and partnerships that reshape the industry's landscape. In this blog, we'll take a deep dive into the tech deal scenario of 2022, compare it to previous years, and look ahead to what the future holds.

Overall Global Tech M&As Activity in 2022

The year 2022 witnessed a surge in tech deal activity, with a total of 947 deals, marking the highest level in the last five years. A significant portion of these deals fell under the IT services segment, which saw a remarkable growth of 23% compared to the previous year. The deal value also surged, doubling from 2020 levels. However, it's worth noting that the number of deals valued at more than $500 Mn decreased from 30 in 2021 to 23 in 2022, with 16 in IT Services and 7 in BPM.

Deal values in 2022 reached approximately $57 Bn, on par with 2021 levels. Notably, the mega deal of 2022 in IT services was the $7 Bn merger of LTI and Mindtree. Additionally, other significant deals included CloudMed - R1 RCM ($4 Bn) in BPM and Vinci Energies Kontron ($400 Mn) in the ER&D segment.

Despite the overall positive trend, we observed a decline in deal activity starting from Q2 CY22 onwards. Nevertheless, the deal activity was still higher than the corresponding periods in 2020 and 2021.

IT Services: A Closer Look

 

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Source: Nasscom EY report - A Year Of Paradoxes: M&A Trends And Outlook In The Technology Services Sector

 

Within the IT services segment, several interesting trends emerged.

  • Strategic deals increased by 19% from 2021 and nearly 70% from 2020. The number of unique buyers also saw significant growth, increasing from approximately 200 in 2020 to around 350 in 2022. Accenture was the most active, with 29 deals, followed by Capgemini with 8 deals.
  • Private Equity (PE) participation in the IT services sector surged, with a 2.5X increase from 2020 in terms of deal volume. Large deals (those exceeding $500 Mn) dominated, accounting for 62% in 2022, up from 50% in 2021. Additionally, PE portfolio companies engaged in four times more add-on acquisitions in 2022 compared to 2020.
  • In terms of deal volumes within the IT services segment, SaaS implementation captured a significant share with 17% of deals, followed by Cybersecurity/MSSP (Managed Security Services Provider) 12% and Digital product engineering 10%.
  • Strategic buyers in the IT services space were driven by various factors, including an emphasis on emerging technologies like IoT, AR/VR, Hyperautomation, and Low Code No Code solutions. Scalability of business operations and vertical expansion were also key drivers, with geographic expansion featuring prominently. Australia, New Zealand, Southeast Asia, Nordic countries, and the UK were the top destinations for expansion.
  • Notably, there was a surging demand for new-age competencies in hyperscalers, particularly Azure.

Conclusion

 

In 2022, the tech industry experienced a significant surge with 947 deals, reaching the highest level in five years. Notably, the IT services sector grew by 23%, and deal values doubled compared to 2020. Despite a Q2 2022 decline, deal activity remained higher than in 2020 and 2021, reflecting the industry's resilience and dynamism.

The next part of the blog series will feature M&A trends in ER&D for 2022.

Source: : Nasscom EY report - A Year Of Paradoxes: M&A Trends And Outlook In The Technology Services Sector


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Prajwal Pandey
Research Analyst

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