Profile of owners of companies we have been engaged to find for Vivanti:

1. Owners who find the following attractive, fit the following profile and want to exit soon or now.
2. Owners who find the following attractive, fit the following profile, want to sell to Vivanti and grow with a larger, growing, organization.
3. Company owners whose consultants help their Clients re-architect and migrate apps to the Cloud, implement robust DevOps practices and processes, and facilitate better user experiences.

Target Expertise:

• Cloud Data Services
• DevOps Solutions
• Customer Engagement
• Artificial Intelligence
• Analytics & Data Management

Target Locations:

• Boston
• Atlanta
• New York
• Washington DC
• East Coast

Financials:

• People: Employs 25 – 35 FTE
• Revenue Range: $5mil – $12mil
• EBITDA: $500k – $1.2mil

What we’re looking for:

• A quick, honest transaction
• A win-win outcome: for you & your people
• Long-term clients
• In-demand skills sets
• Reliable services revenue
• Strong consultant utilization rates

Value Proposition to Company Owners who sell to &/or become part of & grow with Vivanti:

Most important: Can you relate to what the Founding Partners are building?

• Tony Nicol
• Mike Walker
• James Hunt

Watch the Welcome to Vivanti video below.

Our acquisition program is geared to two kinds of Owner Sellers:

• Those who want to exit now.
• Those who want to stay and grow.

These Leaders of Vivanti have a track record of having built and sold brilliantly.

Self-funded; well-funded

• The intention of doing the same again – building another great consultancy – without the threat of having to sell at the wrong time.
• Those who want to stay and grow. The chance to take advantage of a ‘double-bubble’ downstream. (IPO, etc.)
• The strength of being part of a much larger group and therefore protected from market uncertainties.
• Providing growth opportunities to those Owners Sellers that may not be within reach at the moment.
• If you relate to the video, website contents and what we are saying, and want more information, contact us.

Download Teaser

For more information, please download our teaser here.

If you’re interested, please contact:

Taylor Devine
Principal, Washington DC
taylor.devine@eatonsq.com
+1 703-754-8829

Andrew Light
Managing Principal, Toronto
andrew.light@eatonsq.com
+1 647-985-2639

Q4 Deal volume declined

2021 overall was an exceptionally active year for M&A. Q4 saw a drop in the volume of deals declined relative to Q3. Activity levels within the software sector remained strong including the eye-catching sale of New Zealand’s Weta Digital to Unity (NYS: U) for $2.26Bn.  The report covers transactions from 1 Oct – 31 Dec 2021 in Australia and New Zealand in the following segments:

• IT Services & Digital Marketing
• Software
• Telecommunications & IT Distributions

Early indications suggest that 2022 will also be a very active year for M&A in the technology sector.

Featured Deals: IT Services

Featured Deals: Software

• Volaris Group acquisition of Decideware: Sale of Sydney-based developer of agency management platform to assist in marketing & procurement to a division of Toronto-listed Software consolidator
• Instacart acquisition of FoodStorm: Sale of Melbourne-based developer of a cloud-based platform intended to automate and manage catering orders to US venture-backed $39B unicorn in the on-demand grocery delivery space.
• Unity acquisition of Weta Digital: Sale of NZ-based provider of visual effects to the entertainment sector to a US $34B listed provider of software platforms for 3D content creation.
• Ideagen acquisition of CompliSpace: Sale of Sydney-based developer of governance, risk, and compliance software to UK listed compliance software specialist.

For a full M&A listing, download your complimentary copy here.

Meet the Professional Services and IT Services Team

Neil Bourne is the Managing Principal for Eaton Square Sydney. Neil has been working with growth stage technology business for over 15 years in venture capital and corporate finance. Neil Bourne, Managing Principal neil.bourne@eatonsq.com

Warren Riddell is a Principal at Eaton Square based in Sydney. He has 30 years of global M&A experience as a vendor, acquirer, financier and advisor. Warren Riddell, Principal warren.riddell@eatonsq.com

Patricia Glovsky is a Principal at Eaton Square. She is a technology investment banker with more than 30 years of corporate finance investment banking (M&A and capital raises (private placements, debt and IPOs)) experience. Patricia Glovsky, Principal patricia.glovsky@eatonsq.com

If you have questions about your IT Services or software business, please contact our team for a non-obligatory call.

We see a strong demand for acquisitions in 2021 across the entire IT services sector as investment capital from private equity, family offices and public markets continues to be attracted by the sector’s long-term growth prospects.

People remain the major asset for most IT Services business and the constant need to drive scale, build capabilities whilst preserving margins shape the sectors M&A dynamics.

The IT Services Vortex:

1. At the bottom of the funnel: A constant flow of new entrant as small teams of skilled individuals can easily branch out by themselves;
2. In the middle: Ongoing need to build depth across ‘hot’ capabilities either product/vendor based or domain specific such as we are currently seeing in the cyber security area. Leveraging acquisitions for accelerated scale through cross-selling and up-sell — customers tend to stick with their suppliers post-acquisition. It makes perfect sense to acquire teams that bring existing customer relations, particularly if that helps the acquirer cost-effectively expand into new industry segments or geographies.
3. At the top: Buying for market share.

Three drivers of M&A in IT Services sector

Off the back of last year’s gyrations, we see three reinforcing trends driving M&A in 2021:

1. Consolidation at the top
2. “IT Services”-as-a-Service
3. Channel Partner Aggregation

Consolidation at the Top

Jumping in our time machine back to early 2019, the Everest Group put out a list of the top global IT Outsourcers. Since then, all have made multiple acquisitions as the majors jostle for market share:
([#]number of acquisitions since March 2019)

1. Accenture [15]
2. TCS [3]
3. Cognizant [16]
4. Wipro [7]
5. HCL [7]
6. Capgemini [6]*
7. IBM [10]
8. Infosys [6]
9. DXC Technology Company [6]
10. NTT DATA [2]

* plus the acquisition of ASX:RXP pending

“IT-Services”-as-a-Service

The trend towards cloud computing has helped many mid-market IT Services business migrate towards recurring revenues based on long-term contracts or what we refer to as Managed Services Providers (MSP’s). This is happening across Infrastructure services, IT support Services, with a lot of recent activity in the Cyber Security sector. Private Equity is very interested in the Managed Service Provider business model, and we are seeing many MSP’s looking to acquire customers bases and capabilities to drive scale.

Channel Partner Consolidation

The names of a few high-profile enterprise SaaS products continue to be high on the wish list of large and mid-sized acquirers. Vendor partners in strong demand include Workday, SAP, SalesForce, ServiceNow. More generally, we are finding strong interest from local and international channel partners in acquiring similar business in adjacent market segments or new geographies for scale and market coverage.

Finding a strategic partner that ‘gets it’

If you’re not entirely sure where your company stands in this niche, we are happy to schedule a call with you to discuss. Our global team is comprised of senior M&A professionals across the US, Europe and Asia-Pacific. Each of us has extensive experience in the Professional Services and IT Services.

To help understand what this means for the business transformation and IT services sector, I interviewed Thomas Griffin, Managing Director for Mergers and Acquisitions at Accenture to get his perspective.
Watch the full video below:

How do you think COVID is impacting the M&A process?

It’s impacting the process and I think it’s going to be different for everyone but for us what we’re finding is that for the last few months activity has been down. It’s starting to pick back up, at least in our part of the world from the perspective of companies resetting and getting used to the new normal. They’re thinking again about their M&A plans if they had put those on pause.

From a process standpoint, when we think about origination we’re trying to stay away from companies that are servicing the highly impacted industry such as automotive or airlines, hospitality. We’re looking for resiliency right now because of the added risk when we transact.

We’re looking to introduce some creative deal structures to share some future risks that we’re seeing in this economic environment. On the post merger integration front, we’ve actually integrated a few companies this year and we’ve had a heightened sense of awareness and attention to the well-being of the employees, just like we would with our existing employee base. It’s a lot of change for a company of normal times, and it’s even harder now.

Has this changed the way you review targeted firms before you engage and conduct due diligence?

The key for us when we’re looking at companies and hoping to get to that due diligence process is understanding the what and the when of the impact of COVID. What I mean by that is how exposed are these companies to those industries I mentioned before. Beyond that are they able to pivot to other industries and how are they doing in general financially but also their people and other people adapting okay in this environment.

I’ve talked to a lot of companies that are actually doing quite well through COVID but it turns out they’re living on a long tail of backlog. The question I have for these companies is how have you been able to keep up the sales process during lockdowns? Are you able to do that virtually? Are your sales continuing to help the growth or have the sales dropped off, and then in the next few months are we going to see a bit of a trough for them?

Looking ahead, do you have thoughts on which sectors or service lines will be of increased interest even after the impacts of COVID?

When I think about the demand for M&A for Accenture right now, I look into what is it that our customers really need most. In reality, this is where we’ve been focusing for a long time. I’m talking about being able to acquire skills that will accelerate our ability to support our customers. The types of firms we’re looking for include:

• Digital transformation journeys like the journey to the Cloud. Cloud skills are very important to us. Accenture specializes in this, but we see it as a growing area. We’ll continue to look there.
• Supply chains are getting a lot of attention. Do we have the supply chain consulting bandwidth to help all of our customers, or do we need to expand there?
• Factory’s output have been down. How do we make them more efficient? Accenture has a really good practice that supports digital manufacturing and operations. Do we need to grow that?

I think these are the hot areas for M&A for us right now.

How are you doing transactions when you’re not able to physically meet people?

It’s been tough right. It’s been very different. Meeting people like we are right now has become the new normal for us as we continue to originate new opportunities and the question is can we close a deal without having ever physically met?

The leadership of this company and that question remains to be seen for us here locally. I think we’re going to have to if we want to continue our M&A pursuits. Interestingly, I have spoken to the CEO of another company recently who said: “He would not proceed until we could actually have a sit-down meeting in a room” and so it’s two different perspectives there.

If you own an IT Services business and would like to discuss your plans, we are offering a one-hour complimentary call with any of our experts. You may book a call here.

You can watch the other episodes of Eaton Square Perspectives here.

Lessons and Outlook in Tech

Neil Bourne
Managing Principal
Sydney

• The market for cybersecurity solutions and services continues to grow with no abatement. Especially in toolsets that integrate with most mainstream solutions and the latest digital platforms. Demand for skillsets in this sector is especially strong.
• The growth of Private Equity in the IT Services sector is also pushing up the process and giving sellers an option beyond just strategic buyers. Some sellers are attracted to working with Private Equity as it enables them a ‘second exit’ which is relatively new to the services sector.

Fearless Forecast for 2020

• The availability of low-interest debt is expected to sustain the market for acquisitions as it remains cost-effective to purchase growth in addition to pursuing organic strategies.
• PE Funds will continue to bulk up portfolio companies with bolt-on acquisition to accelerate growth and leverage the buy/sell arbitrage from buying sub-scale business and selling market share leading platforms

• We see a decline in funding for ‘Field of Dream’ strategies that rely on spending big to capture market share outside the US and minor players struggle to gain sufficient scale to dominate globally.

Andrew Light
Managing Principal
Canada

Consolidation is likely to continue where technology provides a distinct competitive advantage to the larger players. Sectors such as financial services and banking in North America are key.

Fearless Forecast for 2020

• Developed regions and jurisdictions such as the UK, Canada and Australia have seen their currencies lower to represent good value for a variety of local political and economic reasons. 2020 is a good time for value-based cross-border acquisitions, especially for leading technology expertise.
• Mobile commerce has yet to hit North America in the way Asia and many parts of Europe have adopted, especially in terms of cashless/cardless transactions. We expect many acquisitive plays to help a variety of players leapfrog the time needed for organic growth; think large tech, telco, digital retailers and more!
• The onset of 5G Networking is a game-changer. It will allow for applications previously unfathomable due to latency and reliability issues. We expect to see determined M&A activity as enterprises seek to gain early-mover advantage in their chosen fields.

Matt Pritchard
Principal
Hong Kong

During 2019 we saw a significant shift in technology investing and the geopolitical landscape. Some takeaways in looking back over 2019 are:

• Huge upswing in engineering subcontract organizations. They are now very niche-oriented towards specific disciplines of talent vs centralized in a low-cost region such as India. In software, for instance, they are more interested in Programmable logic or ASIC development vs the previous push for simple web designers. RF, OPTICS, POWER etc. are all other discipline-specific groups that have had a surge of acquisition.
• Multiples on tech plays seem to differ from strategic investors vs straight financial investors. Strategic investors seem to perceive a multiple 30% higher as valid. While this is not necessarily new its worth being aware of.
• All hardware companies become software companies ultimately; this is not a new concept but with the advances of Internet of Things (I0T) and Artificial Intelligence (AI) as a front end for everything electric, it seems to be an accelerating trend.

Fearless Forecast for 2020

• Telecom Original Equipment Manufacturers (OEM) will once again thrive as revenue will flow to the inventor vs the channel. There as been a void in telecom R&D efforts due to low margins and with the IoT demand it will push need over cost.
• Regardless of what General Motors and the Media are telling you, there is a significant part of key automotive companies, software companies and computer companies all investing in smart cars, autonomous driving, sensor tech, EV tech etc. Volkswagen and Ford are trying to lead the investment bandwagon. Most automotive companies have stopped R&D investment in combustion engines. This investment and lack of investment will show itself more and more as the year goes on.
• IoT will have a five year + reign on consumer electronics, if it’s electric it can be controlled and interconnected through a local area network.
• Food Tech is only just beginning. With just over a billion capital raising over the past 18 months and there are only four significant sized players in the market. As the product has now moved to the fast food industry this trend will continue due to the rapid expansion of the market. Major R&D investment such as Independent Chemists, labs and such will dominate this acquisition space
• Fabless, R&D less and office-less virtual companies are becoming the norm. Ideas can be brought to market with a very small indirect cost but considerable direct costs. With the onset of WEWORK and other co-working environments, firms are hiring based on talent/cost vs geography. This will have a positive effect on mid-market cities.
• The new dinosaurs in 2020 and beyond are a number of tech/business tools and products which will disappear. For instance, the office telecom system (Pollycom, Cisco etc. will hurt), cubical farms and large office footprint will diminish (hurting the Herman Miller type companies), physical cash and cash management infrastructure will go away with EPS and, tap and go plus Cryptocurrencies (hurting firms like NCR, IBM, Brinks etc.), and remote controls and such will disappear as your phone will become a master remote control for everything tech in the home.

Summary

Despite the economic challenges, our team at Eaton Square is positive that mid-market mergers and acquisitions in Tech will continue to be an important source of innovation and growth in 2020. With the onset of 5G and the speed of advancements in AI and IoT, we see 2020 as a good time for value-based cross border acquisitions.

Do you agree with these predictions? Have you planned out your 2020 strategies yet? If you would like to talk about your growth strategies for your IT firm, feel free to contact our global team.

Strong Growth in Mid-market Digital Agencies

As a consequence, we are seeing strong acquisition demand for mid-market digital agencies, digital marketing specialists and digital transformation service providers from multiple industry sectors, including:

• Major advertising agencies buying cutting-edge talent and strategy implementation capabilities
• IT Services players, adding ‘demand generation’ and deep UX capabilities to their suite of ‘digital transformation’ services
• Other media businesses jostling to capture and influence an increased share of rapidly changing media spend.

These players are also seeking technology services companies that are able to integrate the systems required to deliver the promised customer experience and offerings.

Rapid evolution in technology and social attitudes to media is also driving C-level interest in acquiring skills in emergent areas such as programmatic buying, Big Data Analytics, Artificial Intelligence, Robots and other areas with the potential to transform the customer interaction journey.

This buoyant market is increasing profitability and margins, driving higher multiples as international buyers compete for attractive firms.

Interestingly, most buyers are cross-border acquirers.

Target Company Type

According to an R3 study, there was a 42% increase in demand for martech and adtech companies in 1H 2018. There was also an increase in the acquisitions of digital full-service agencies (7%).

2019 is shaping up to be an attractive time to test the market, particularly for businesses founded in the early 2000 post dot-com period, who have achieved scale and growth.

Earn-outs are common in the sector as a means of bridging the valuation gap between buyers and sellers. Earn-outs can run for two to three years making it particularly salient to sell when client demand is strong.

If you are interested in what this demand for digital services acquisitions could mean for your shareholders, we would be happy to talk to you.

Patricia Glovsky
Principal

Patricia E. Glovsky is a technology investment banker with more than 30 years of corporate finance investment banking (M&A and capital raises (private placements, debt and IPOs)) experience.  Through her career she worked primarily on technology M&A and private placement transactions and developed a unique focus on “Visual Computing technologies across industries”.

patricia.glovsky@eatonsq.com
Ph: +1 415 775 3300

Eaton Square a cross-border M&A and capital services firm focused on services, technology and growth companies in the US, Canada, Australia, Asia and Europe.

Key Reasons Driving Demand for IT Services

1. The desire for acquisitions is also being driven by C-level interest in emerging technologies such as Artificial Intelligence and Blockchain while CIO’s are taking advantage of the cloud to reallocate IT budgets back into development and supporting service innovation.
2. This buoyant market is increasing profitability and margins, driving higher multiples as international buyers compete for attractive firms.
3. In addition to interest from more North American and European buyers, strong growth in the Chinese and South-East Asian markets has broadened the pool of acquirers.

2019 is shaping up to be an attractive time to test the market, particularly for businesses founded in the early 2000 post dot-com period, who have achieved scale and growth.

Earn-outs are common in the sector as a means of bridging the valuation gap between buyers and sellers. Earn-outs can run for two to three years making it particularly salient to sell when client demand is strong.

Buy-side Deals in IT Services

Recently, we have been contacted by PE Funds and Corporates who are actively looking for acquisition targets in the IT sector. In our October 2019 Buy-side Deal Book, we’ve listed a couple of opportunities for business sellers and we can confirm that IT still remains a highly attractive industry. You may review a full list of opportunities in our Deal Book page.

If you are interested in what this demand for IT Services acquisitions could mean for your shareholders, we would be happy to talk to you.

Patricia Glovsky
Principal

Patricia E. Glovsky is a technology investment banker with more than 30 years of corporate finance investment banking (M&A and capital raises (private placements, debt and IPOs)) experience.  Through her career she worked primarily on technology M&A and private placement transactions and developed a unique focus on “Visual Computing technologies across industries”.

patricia.glovsky@eatonsq.com
Ph: +1 415 775 3300

Eaton Square a cross-border M&A and capital services firm focused on services, technology and growth companies in the US, Canada, Australia, Asia and Europe.