IT Services Companies: 2019 Review and 2020 Predictions

<p><strong>2019: A Year in Review</strong></p><p>M&A in IT Services Was Hot</p><ul><li>We saw a record year in the number of transactions. Not only with Revenue Rocket but in the industry in general</li><li>Overall across industries there was a flattening in M&A volume except for IT Services where we saw an acceleration in deals</li><li>Companies valuations increased with most deals having at least a 6X multiple</li><li><a href="https://www.revenuerocket.com/podcast/private-equity-investing-in-it-services-companies/">Private Equity buyers</a> are looking to invest or buy IT Services companies, accounting for a higher number of transactions than 2018.</li></ul><p>IT Services firms found new ways for growth by focusing on:</p><ul><li>Specialization: companies spent more time focusing on a set of well-defined technologies within partner driven hardware and software stacks. We continue to see a shift towards cloud adoption in both infrastructure and applications, and the need for service providers to lift, shift, and optimize clouds for clients</li><li>Verticalization: more IT service providers were targeting vertical markets, building solutions tailored to the needs of a niche. This improved valuations and improved client retention.</li><li>There’s an increased influence of IT Services companies in the overall economy, impacting how companies embrace a digital transformation</li><li>Stock market growth has given companies more confidence in making investments within IT</li></ul><p><strong>A Bright Future for 2020</strong></p><p>We see no deal shortage coming for 2020 and we think it will accelerate even more. Many IT Services companies have had record years in 2019, but there is an opportunity to top those numbers in 2020. There is an increasing <a href="https://www.wsj.com/articles/corporate-tech-spending-helps-lift-u-s-economy-11569367000">influence of technology</a> in the economy that will play into the coming year of growth.</p><p>We predict continued consolidation this year and see a strong appetite from acqui