Understanding IT Services & Software M&A Trends in 2023Q1: An Outlook

The business of mergers and acquisitions (M&A) is cyclical, fraught with highs and lows that often leave market players grappling to plan their next move. Whether it's competitors acquiring smaller firms or large foreign investors entering new markets, this unpredictability is inherent to the M&A scene. This is particularly true for the IT services and software industry.

Tuluhan Erdemi

In comparison to 2021, the general M&A landscape has quieted down. There’s been a noticeable decline in the number and valuations of deals over the past half to full year, with the IT services and software sector feeling the brunt of this impact. So, what are the current observations? And what’s the forecast for the upcoming months?

Less Activity, Lower Valuations: Will 2024 Show Promise?

The first quarter of 2023 saw 340 deals compared to 437 in the same period of 2022. The slowdown in M&A activity over the last 6-12 months is evident. Negative impacts on IT budgets, due to macroeconomic uncertainties, have led to a ‘smaller pie’ scenario even for major consulting firms.

M&A Activity in IT Services Sector, © Arthos
M&A Activity in IT Services Sector, © Arthos Digital Services Report

Valuations have followed suit, dropping by approximately 15-20%. The reduced activity from financial investors, who typically offer higher multiples, has contributed to this decline. Despite sitting on vast sums of uninvested capital, these investors have become more cautious.

Interestingly, IT consulting firms have been valued relatively higher than software developers/IT service providers. The former’s trading multiples are approximately 2x (NTM EV/ Sales) compared to 1.2x for the latter. With few exceptions, the general trend leans towards investing in robust, large-scale, and reputable consulting firms.

Even amidst this downturn, market players remain optimistic, anticipating an increase in M&A activity by the end of the year, with even better sentiment projected for 2024.

With few exceptions, the general trend leans towards investing in robust, large-scale, and reputable consulting firms.

AI and the ‘New Normal’

The recent rise in AI capabilities, data automation, analytics, and platforms has piqued the interest of many investors. This trend also extends to risk management and compliance advisory services within the financial services industry.

The shift from traditional IT solutions to cloud computing solutions, along with escalating cyber threats, has amplified the demand for IT consulting services. Businesses that incorporate AI into their cybersecurity strategies are particularly appealing to both financial and strategic investors. Additionally, Environmental, Social, and Governance (ESG) factors have been at the core of numerous major deals.

Tuluhan Erdemi
Tuluhan Erdemi is an independent M&A advisor. Before that, he was Head of Corporate M&A at n26 and Corporate M&A Manager EMEA at PwC Germany

Accenture Spearheads M&A Activity in Q1

Unsurprisingly, Accenture leads the M&A activity in Q1, with 6 deals in the first quarter. Accenture’s annual average is around 30 acquisitions globally. Here are some of the most noteworthy deals from the first months of 2023:

  • PwC’s acquisition of CH-based Avoras in April: A provider of SAP (Gold partner) consulting and implementation services focused on the S/4HANA platform for clients in the pharma and life sciences sector.
  • Accenture’s acquisition of FR-based Optimind in March: A digital transformation agency offering advisory and risk management services for insurance firms, banks, and large corporate clients. This acquisition seems particularly timely given the current upheaval in the banking sector.
  • Leon Capital’s investment in NO-based Xynteo in March: A provider of sustainability consulting services.
  • RSM’s induction of DE-based Ebner Stolz in March: One of Germany’s largest accounting and advisory firms.
  • Inflexion Partners’ acquisition of CH-based DSS+ in February: A sustainability consultancy formerly part of DuPont.
  • Cognizant’s acquisition of UK-based Mobica in January: An IoT software engineering services provider.


The M&A activity in the IT services and software sector has seen a downturn in 2023, marked by fewer deals and lower valuations. However, optimism persists for a revival by year-end and a brighter outlook in 2024. IT consulting firms currently enjoy higher valuations than software developers/IT service providers. AI capabilities, cybersecurity, and ESG factors remain key areas of interest for investors. Accenture continues to lead the M&A activity, with a series of significant deals already under its belt in Q1. Despite the turbulence, the market continues to adapt, evolve, and prepare for future opportunities.

Further reading and sources: GP Bullhound Digital Services Update, Arthos Digital Services Sector Report

About the author

Tuluhan Erdemi

• 11 years of international experience in corporate/ buy-side M&A and sell-side M&A advisory • Skills: Business plan preparation, valuation, financial statements analysis drafting & negotiating offers, deal documents (SPA, SHA, APA), investor presentations, due-diligence management, deal sourcing, target identification, deal structuring, C-level communication • Advised 50+ complex international acquisition projects, which amount to €1bn+ in total • Sectors: Fintech, professional services - cyber security, healthcare, retail, tech/ start-ups