The 2023-2024 State of the M&A Market for IT Services Firms

Macroeconomics are affecting buyers (and some sellers). 

However, many buyers still have access to plentiful amounts of capital, while levels of activity and expenditure are only slightly down from the levels of activity seen in 2022. 

TechTarget recently reported that there’s been a dip in M&A activity since the second half of 2022 but is predicting a rebound in 2024 and beyond. 

At iT Valuations, we’re seeing activity levels about the same as they were in 2022 with transactions wanting to close quicker than before to avoid fears around taxation and rising interest/borrowing rates.  

Here are some key takeaways in the state of the market for IT services firms for 2023 and beyond:

  1. Demand is there but buyers are nervous. There’s still demand for tech owners who want to sell and exit their firms, but many buyers are somewhat concerned about the economic outlook, with increasing interest rates and accelerating inflation the major worries. 
  1. Private equity interest in buying tech firms hasn’t waned much. There has been little impact on the M&A plans of most Private Equity firms. They’re still buying IT firms, SaaS providers, and other channel vendors to increase the value of their overall portfolios. Capital is still flowing freely into these PE firms to fund their acquisitions.  
  1. Buyer behaviors haven’t changed much, which is encouraging for sellers. Because of the strong tailwinds behind them, we haven’t seen buyers noticeably change their behavior in the past year. While transaction and funding details might change from deal to deal, the overall mindset hasn’t noticeably changed.  

The Challenge 

For most, the biggest challenge was how to meet the demands of a saturated marketplace. 

Buyers have remained active because of the need for Private Equity still sitting on record levels of dry powder. It’s no surprise that nearly 70% of buyers and investors expect an increase in available capital. The outlook for deal volumes for the rest of 2023 remains strong, although not as high as the record highs of last year. Expectations for deal volumes in the longer term are strong, suggesting any slight softening in 2023 is likely to be short-lived.  

Buyers and investors expect deal sizes to be largely the same next year, with few parties expecting smaller deals. Technology services and channel integrators/software vendors remain the vertical(s) with the strongest level of overall buyer interest. 

The rest of 2023  

Despite the caution we’re seeing in the market, it’s reassuring that the appetite for deals remains strong, though off the highs of last year. Private Equity expectations have moderated in the last twelve months, with more than half of buyers saying they expect to do ‘the same amount’ of deals in the coming year.  

Buyers who are cash rich will keep acquiring, but those with less capital may find it harder to access debt financing and so will likely focus on acquisitions that will really move the needle for them in a shorter-term ROI.  

Technology services of greatest interest for buyers 

Buyer interest in Cloud solutions remains exceptionally high. If you’re an IT firm or MSP with a Cloud practice that aligns with SVP (Specialization, Verticalization, and Productization) then there’s acquisition demand because there’s need across ecosystems for service providers that can reduce the complexity of Cloud implementation and integration. 

There’s also interest in tech firms who have a profitable track record of services like data analytics, providers focused on Enterprise SaaS, and managed services.  

Buyer and investor assessments of potential acquisition targets remain extremely consistent with formal valuations telling the story of whether or not your firm is a good acquisition target. The most important assessment criteria for Private Equity buyers and investors are quality of management, revenue growth, and profit margins, according to Equiteq’s 2023 Annual Report

To learn more about how your IT services firm can take advantage of a very healthy seller’s market, as well as the continuing trends, get in touch with us here. Whether you’re looking to sell, buy, merge your business, transfer a partner, or simply learn how to maximize your value – we’re here for you. Get started by completing this form or email me at