IT Consulting: M&A Deals & M&A Multiples in Europe 2023

In 2022, the IT Services industry experienced a successful year with high deal activity. However, the year 2023 brought about a significant slowdown due to political and macroeconomic challenges. As a result, both buyers and sellers had to reconsider their strategies. In this article, we will explore the reasons behind the slower M&A activity in 2023, take a closer look at the most notable deals, and examine the visible correction of global valuation multiples.

M&A deal activity in 2018-2023

Analyzing deal activities between 2018 and 2023 presented by KP Tech M&A Advisory shows that Europe experienced a significant increase in deal volume, which has remained consistent even before the COVID pandemic. A comparison of three regions – Europe, DACH (Germany, Austria, and Switzerland), and Rest of the World (ROW) – highlights Europe’s strong potential.

In 2018, ROW had a deal volume of about €1,926 million, Europe had €123 million, and DACH had €550 million, with a total of €109.1 billion. There were fluctuations in the subsequent years: in 2019, ROW had an increase to around €2,110 million, Europe had €114 million, and DACH had €643 million, with a total of €133.0 billion. Despite higher deal volumes in 2020 and 2021, the total deal value reached its peak at €266.1 billion in 2021.

In 2022, ROW and Europe had slight decreases, while DACH increased, resulting in a total deal value high of €278.1 billion. However, 2023 showed a decline across the board, with ROW at around €2,363 million, Europe at €137 million, and DACH at €776 million, with a total of €120.7 billion.

Top Three Acquisitions in Europe

In the year 2023, there were several noteworthy investment and acquisition deals. Out of these deals, three are particularly praiseworthy for their deal value.

The deal with the highest value was the acquisition of Software AG by Silverlake. Software AG was the owner of several platforms like the Internet of Things, analytics, application programming interfaces, and integration and microservices. The company provided services to various sectors such as banks, communication and media platforms, local and federal government, and many more. It was acquired for € 2.7 billion.

The second-ranked deal was the acquisition of Engineering Solutions by KKR for €903 million. The company had a vast customer base worldwide (over 6,000), with over 650,000 users, aiming to optimize workflows and end-user experiences. The acquiring company, KKR, plans to accelerate growth, expand its footprint and continue the innovation of Engineering Solutions.

UltraEdge provides companies with data centres located in France, offering data storage and connectivity services. The capacity of these centres is more than 45MW and they cover an area of over 33,000 square meters, including owned office space. Recently, Morgan Stanley acquired UltraEdge for €764 million.

Global Valuation Multiples Witnessed Correction

The report by KP Tech compared the global valuation multiples, pointing to the difference between strategic buyers and financial buyers, mentioning average multiples for them.

The data points indicate fluctuations over time: from a modest level in earlier years to a sharp increase in 2022, particularly for Financial buyers. However, in 2023, both Strategic and Financial buyers witnessed a decline in their valuation multiples compared to the previous year, with Financial buyers experiencing a more significant drop. Despite this correction, the multiples in 2023 remain higher than those observed in earlier years.