NASSCOM – M&A and PE deal value and volumes rose as demand for emerging M&A and PE deal value and volumes rose as


The National Association of Software and Services Companies (NASSCOM), in collaboration with EY, has today released its study, titled “M&A trends and outlook in the Technology Services Industry”. The dramatic increase in technology budgets allotted to cloud and managed services in the last couple of years has accelerated enterprises’ investments in emerging technology segments, particularly in newer security solutions, data and analytics, and AI/ML. Conversations with industry leaders and businesses indicate that strategic acquirers continue to view M&A as an important lever for growth and competitiveness, and PE investors will aggressively compete for quality assets.

Post the onset of the pandemic, the spending growth rate has doubled with increased demand for technologies that enable cloud transformation, workplace digitization, and collaboration. Strategic acquirers continue to lead deal activity, with activity levels comparable across different strata of large and small companies. The overall IT industry has continued to witness an increase in M&A, as well as private equity (PE), deals in 2021 (USD297 billion+) as compared to 2020. Since the last two years, the industry has witnessed over 100 acquisitions by the top 10 technology services companies across primary capability buying with an economic value of $20-50 million as well as big-ticket acquisitions worth $1 billion+.

The strategic imperatives of growth, differentiation, and diversifying delivery footprint has resulted in increased M&A interest in areas such as cloud (IAAS, PAAS and managed services), digital engineering, customer experience, and data & analytics. Further, with the increasing demand-supply gap, the acquisition of talent and skills is another emerging driver of M&A in the last one year.

Speaking on the occasion, Debjani Ghosh, President, NASSCOM, said, “Despite the challenges posed by the ongoing pandemic and looming concerns around a third wave, deal-making in 2021 has shown considerable resilience, with close to 1200 deals valued at USD 297 billion+. PE firms have maintained enthusiasm in the Technology Services sector owing to increased tech spending and demand for technologies enabling cloud transformation, workplace digitalization, and collaboration. Backed by disciplined investment strategies, capability expansion, as well as a sharp and differentiated customer value proposition, the deal landscape is expected to grow at an exceptional pace in the coming months.”

Valuation and IPOs

According to the analysis, valuations in both public and private markets are at all-time highs. Public markets are emerging as a viable alternative to PE with public valuations regularly outstripping private valuations. Underpinned by sustainable top-line growth, predictable financial models, and attractive operating metrics, Technology Services Companies with a large total addressable market are witnessing higher interest from IPO investors. Additionally, in India, the public markets have embraced smaller scale and high growth / differentiated Technology Services stories, creating a viable avenue for growth capital and liquidity.

The study indicates that the valuation for both public and private markets is at an all-time high. Publicly listed companies have largely weathered the impact of uncertainty around the COVID-19 pandemic. Large cap and Digital Engineering median EV/EBITDA valuations have nearly doubled from 7.8x to 15.4x and 26.0x to 65.8x respectively, from June 2020 to December 2021. Further, the valuation jump of Mid cap Tech Services players has been even more notable from 9.5x to 31.9x during the same time period. While, specialized Digital Engineering players continue to provide consulting, design, and engineering services to customers, essential for businesses in the midst of digital transformations.


With an increased focus on emerging digital capabilities, and nearshore delivery, technology services M&A is likely to witness some structural changes, and the ongoing sector consolidation is expected to emerge as a dominant theme, over the next few years. Further, capability expansion for technology services companies will continue to be a key growth driver, with strategic acquirers looking to address white spaces in their service offerings. With close to 400 SPACs with over US$ 500 billion in capital available for future deal-making, IPO market is expected to be buoyant over the near term with SPACs becoming a viable path for raising capital and accessing public markets.

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