6 M&A Trends Shaping the Technology Services Sector 2023

March 13, 2023

In the recent Technology Services Quarterly M&A Trends Report, the global Equiteq team outlines six key trends that are predicted to shape M&A in the coming year.

Here are the trends and key takeaways: 

M&A Trend 1: Ongoing economic challenges

  • M&A activity will likely continue to see a slowdown in H1 2023 as a result of high interest rates, inflation, and availability of capital
  • Private Equity buyers still hold significant amounts of dry powder that needs to be deployed, while Strategics remain more cautious
  • Niche Tech Services firms will likely better weather market uncertainty and prove more attractive to buyers 

M&A Trend 2: Digital transformation agenda

  • The cloud - and everything it enables - will remain a fundamental driver of M&A activity in the Technology Services space during 2023
  • Digital transformation continues to penetrate ever deeper and the adoption of innovative technologies underpinned by 5G and web 3.0 are driving new business models and attracting significant interest from buyers
  • There is a growing opportunity for Tech Services firms to add value to clients - even if the underlying technology platforms themselves may be underperforming

M&A Trend 3: Embracing emerging and next-gen technologies 

  • Advances in AI and ML are accelerating driven by the need for organizations to maximize the insight and value of ever-growing pools of data
  • Monetization remains an essential hurdle for emerging technologies to overcome if they are to become more mainstream and attract significant buyer interest
  • A lack of market leaders in more innovative areas of technology means that buyers may have to temper their expectations when considering interesting opportunities

M&A Trend 4: The increasing participation of Private Equity 

  • High levels of dry powder will continue to sustain a growing level of M&A activity among Private Equity and Private Equity-backed buyers
  • The need to see returns in the 2026-33 bracket will see financial investors drive further market consolidation through buy-and-build investments
  • Short-term macroeconomic uncertainty is unlikely to significantly impact Private Equity participation in 2023, compared to Strategics who may need to be more cautious with capital

M&A Trend 5: Vertical-specific software solutions

  • Key verticals of interest among buyers are: FinTech, healthcare, life sciences, and sustainability
  • Valuations for vertical-specific Tech Services firms are down on H1 2022, but will likely remain at a stable level throughout 2023
  • Profitability remains a critical concern among nearly all buyers of vertical-specific firms - but this doesn’t mean that they should be afraid of still investing in innovation

M&A Trend 6: Nearshoring continues to appeal 

  • Talent scarcity challenges may have eased slightly in the latter half of 2022 but the demand for skills in the face of high people costs remains a key driver of nearshoring M&A activity
  • Buyers in Europe are starting to look further afield for essential tech skills as traditional nearshoring talent bases continue to be impacted by the ongoing situation in Ukraine
  • Nearshoring deals are taking longer to complete as buyer due diligence becomes more granular and stringent, especially for firms looking to invest in potentially new markets


To learn more about the six M&A trends, download the Technology Services M&A Report.