As transaction volume picks up, the EMEA region is getting more attention from IT services investors amid demand for digital transformation consulting.
M&A transactions in the IT services arena are picking up pace, with Europe one area of activity.
An October report from Drake Star, an investment bank, cited more than 305 digital services M&A deals in the third quarter of 2023, compared with 290-plus transactions in Q2. The quarter has “seen significant deal momentum,” according to the company, which pointed to the need for digital transformation and cost efficiency as fueling demand for such companies. Drake Star includes managed IT services and digital transformation service providers in the digital services category.
While economic uncertainty affected IT services M&A earlier this year, the Drake Star report said investor confidence is growing amid stabilizing interest rates.
IT services deals in Europe
European transactions stand out among the current M&A trends. Accenture this week said it inked an agreement to purchase 6point6, a U.K. technology consulting firm with offices in London and Manchester. 6point6, which employs about 400 people, focuses on cloud, data and cybersecurity services.
The transaction volume stems in part from North American service providers looking to acquire companies in Europe. A September report from Cap Expand Partners, a financial consultancy based in Belgium, noted an uptick in intercontinental transactions involving IT consulting companies. While European firms have been expanding into North America, the pattern is stronger still in the opposite direction. North American companies are “aggressively capitalizing on European market opportunities,” according to the report, “Connecting Continents: European and U.S. IT Consultants.”
The slower uptake of digitalization in Europe is one factor driving interest in European services providers.
The divergence in digital adoption levels between Europe and North America is a key factor influencing the interest of IT consultants in European opportunities.
Sergio van Luijk Managing partner, Cap Expand Partners
“This scenario offers opportunities for digital transformation, making the European market particularly attractive to North American consultants,” he said.
Other considerations include the COVID-19 pandemic, which highlighted the digital adoption gap between U.S. and European businesses, and the opportunity for boosting European firms’ productivity through digital initiatives, van Luijk added.
Syntax’s acquisition plan
Syntax Systems has one intercontinental IT services deal in the works. The Montreal-based technology solutions and services provider plans to acquire Beyond Technologies, a professional services firm with operations in countries including Canada, the U.S., France and Morocco. Syntax announced the pending transaction on Oct. 3.
The EMEA region offers an opening for expansion. “Europe continues to be a market where industry analysts project double-digit IT services growth and there is still significant transformation opportunity, as digital transformation is a virtuous cycle,” said Christian Primeau, global CEO at Syntax.
Syntax previously acquired Freudenberg IT in Germany and Linke in Spain. Primeau said the company’s intent to join forces with Beyond Technologies will provide access to France’s IT services market, noting the need to invest in local expertise and local language resources to serve clients in Europe, the Middle East and Africa.
Customers seeking productivity gains via transformation are turning to IT services firms, which are attracting investors.
More funding for IT services deals
The growth in private equity funds pursuing deals in the IT services market suggests the potential for more transactions globally. In the U.S., 150 private equity groups have become important MSP investors, said Abe Garver, managing director and MSP team leader at Focus Investment Banking, an M&A advisory firm with headquarters in Vienna, Va. Half of that number are looking for their first MSP platform, while the other half have already acquired a platform and are seeking add-on deals, he noted.
The average size of an MSP-seeking private equity fund grew from $500 million in 2020 to $1 billion today, Garver said.
John Moore is a writer for TechTarget Editorial covering the CIO role, economic trends and the IT services industry.
Thirdera, a ServiceNow partner based in Leesburg, Va., has acquired a UX/UI design agency and launched a digital consulting business unit.
The purchase of Appoxio, a UX/UI design agency focused on ServiceNow, marks Thirdera’s fifth purchase since its founding in February 2021. At that time, Thirdera merged regional ServiceNow partners Evergreen Systems, Cerna Solutions and Novo/Scale into a single company. In May, Thirdera acquired Service Line Solutions, a ServiceNow partner in Australia.
The addition of Appoxio, which is based in Calgary, Alberta, will help customers improve workflows, said Thirdera CEO Jason Wojahn.
In the ServiceNow environment, a workflow automates a multistep business process. ServiceNow’s Quebec release earlier this year added a Process Optimization feature that lets partners analyze the processes underneath business workflows.
Jason Wojahn
An improved workflow starts with designing an intuitive and efficient experience for customers, Wojahn noted. That’s where Thirdera Digital comes in. The business unit will house Appoxio’s 40 UX/UI employees as well as about 30 to 40 Thirdera employees who focus on UX/UI or have skills in that area.
Boosting customer experience drives greater adoption and engagement among ServiceNow customers, which leads to better ROI for the workflows that organizations build with the SaaS offering, Wojahn said.
Thirdera plans to extend its digital design skills from North America into the Asia Pacific region and Europe. “We are going to expand those digital capabilities to be in every geography we are in,” Wojahn said.
Thirdera, while continuing its acquisition strategy, is also growing organically. The company has hired more than 150 people in the last 100 days, increasing its employee count to more than 465 people, Wojahn said. The consultancy employed 120 people when it launched.
Buyers have been keen to purchase cloud professional services firms in 2021, with ServiceNow specialists and Salesforce ecosystem partners seeing particularly strong demand.
Dell channel sales sees second-quarter spike
Dell Technologies cited 45% year-over-year channel revenue growth for its fiscal second quarter, which ended July 2021 — a jump from a 14% uptick in Q1.
Cheryl Cook
Dell’s client technologies line of business, which includes PCs, notebooks and peripherals, contributed to the channel expansion, growing 84% year over year. What Dell calls the do-anything-from-anywhere economy generates a large opportunity in the client business, said Cheryl Cook, senior vice president of global channel marketing at Dell Technologies.
Cook also pointed to cross-selling as an ongoing opportunity for Dell channel partners. Dell has encouraged partners to take advantage of its broader product portfolio since its combination with EMC in 2016.
Partners that cross-sell Dell’s offerings typically benefit from higher revenue expansion, Cook said. Channel companies that sell products from Dell’s client, server and storage lines of business experience eight times the revenue growth of partners that sell two lines of business and 39 times the growth of those that sell a single line of business, Cook noted.
People Tech Group launches UiPath RPA practice
People Tech Group, an IT services provider based in Redmond, Wash., partnered with software vendor UiPath to roll out a robotic process automation (RPA) business.
The organization, dubbed the UiPath Automation Practice, plans to add as many as 1,000 RPA specialists over the next three years. The practice will focus on vertical markets such as automotive, higher education, healthcare and life sciences, and government.
“We are making a big bet that UiPath’s … platform will drive managed services and solutions that fast-track our customer’s digital transformation initiatives,” People Tech Group said in statement. People Tech Group provides digital transformation, enterprise application and cloud services among other offerings.
UiPath works with more than 4,700 partners, including global systems integrators such as Accenture and EY, and national partners such as People Tech Group. Alliances between RPA software vendors and channel partners have grown rapidly in recent years.
Benelux emerges as M&A gateway for U.S. IT services firms
The United Kingdom has traditionally provided a M&A gateway for U.S.-based IT services firms that pursue European expansion.
Research from Cap Expand Partners, a financial consultancy based in Belgium, suggests some of that acquistion activity is shifting to the Benelux countries, which are Belgium, the Netherlands and Luxembourg. The number of U.S.-to-Benelux IT services transactions doubled in the first half of 2021 compared with the first half of 2020, according to Cap Expand Partners.
During that same period, the number of U.S.-to-U.K. transactions declined by a third, the company reported. That pattern has continued into the second half of 2021, according to Sergio van Luijk, managing director at Cap Expand Partners.
The shift in cross-border transactions likely stems from Brexit, van Luijk said. The U.K. left the European Union trading bloc on Jan. 31, 2020. The Benelux countries are EU members.
Channel program launches and updates
Nutanix unveiled a distribution program within its broader Elevate Partner Program, which debuted a year ago. The distribution program’s tiered structure accommodates different types of distributors, said Christian Alvarez, senior vice president of worldwide channel sales at Nutanix. Those categories include tier-one distributors, tier-two distributors, multinational distributors, and distributors that provide training or help partners with quoting and business development, Alvarez said. Nutanix’s North American distributors include Arrow, Ingram Micro and TD Synnex. North American public sector distributors include Carahsoft and ImmixGroup.
Cockroach Labs, a SQL database company based in New York, will add VARs and systems integrators to its partner ecosystem program. The company already executed a soft launch of the reseller portion of the program and plans to roll out the entire program in early 2022, said Jen Murphy, head of channel at Cockroach Labs. At launch, Cockroach Labs plans to offer marketing materials for resellers and systems integrators, as well as a structure to facilitate collaboration between the company’s field salespeople with partners. The company makes CockroachDB, a cloud-native distributed SQL database.
Nobl9, a Waltham, Mass., a provider of a service-level objectives platform, introduced a channel program for systems integrators and solution providers. The company’s initial group of partners includes Accenture and Isos Technology.
Customer projects
NWN Carousel and Cisco are providing the cloud communications infrastructure for the Laver Cup, a tennis tournament that runs Sept. 24-26 in Boston. The project involves shifting live press coverage to a remote media event, which uses Cisco Webex for unified communications. NWN Carousel is a cloud communications service provider based in Waltham, Mass.
SADA, a business and technology consultancy based in Los Angeles, expanded online event planning company Evite’s use of Google Cloud. Evite uses Google Analytics, Google Optimize and Google Workspace in addition to Google Cloud Platform. In addition, the company has started using Google Cloud’s machine learning capabilities, according to SADA.
Upp, a fibre-to-the-home provider in the U.K., tapped Enxoo, a Salesforce partner based in Poland, to deliver a cloud-based business support system. Enxoo focuses on digital transformation offerings for the telecommunications industry.
Other news
West Monroe, a digital consulting firm based in Chicago, acquired Verys, a product engineering services firm. Verys specializes in building software, employing engineers, UX designers, DevOps specialists and project managers. The transaction will be the first in a series of acquisitions planned in the product engineering area, according to West Monroe.
Upstack, a web platform that sells cloud services through sales agents, acquired two consultancies. Idea Communications Group Inc., based in Colorado, offers network and IT consulting services, focusing on medium and large enterprises. MOC4 Consulting LLC, based in California, is a technology advisory firm that specializes in secure networking.
Most AWS partners view the cloud provider’s certification programs as a source of competitive advantage, according to a survey by Enterprise Strategy Group (ESG), a division of TechTarget. More than 90% of the partner organizations polled said their staff’s participation in AWS Training and Certification “puts their company in a better competitive position to succeed over the next three to five years,” the study AWS commissioned ESG to conduct the study. ESG surveyed more than 750 AWS partners.
Lemongrass, an MSP that specializes in migrating SAP customers to the cloud, obtained Microsoft’s Gold competency. The Atlanta company said it extended its services to Microsoft’s cloud based on customer demand and the software vendor’s investment in SAP customers.
Codeless Platforms, a business process automation vendor based in Poole, U.K., partnered with VIS Consulting AG, a Swiss company that offers consulting, implementation and support services.
KnowledgeLake, a St. Louis company that focuses on document processing, added DataBank to its partner program roster. DataBank, a Kyocera Group Company, offers process improvement services.
NinjaRMM, a remote monitoring and management software vendor, introduced Ninja Ticketing, a ticketing system that integrates with the company’s RMM platform.
Executive appointments
Science Applications International Corp., a technology integrator based in Reston, Va., hired Kevin Brown as CISO. Brown was previously vice president and CISO at Boston Scientific, a medical device manufacturer.
Anexinet Corp, a digital business solutions provider based in Philadelphia, named Steve Johnson as president and Matt Merriman as executive vice president of services and delivery. Johnson was previously executive partner at Mill Point Capital, which owns Anexinet. Merriman joins the company through Anexient’s acquisition of Light Networks, where he was vice president of operations.
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