High Liquidity Fuels M&As In Tech Space

From IT services companies to SaaS firms and startups with good round of fund raise are looking at acquiring firms that can push up their revenues or build capabilities in the new technology area. In the IT services space, not only big or mid-tier IT firms, but also small IT companies are acquiring firms - Maneesh Bhandari, Co-founder and CEO of GrowthPal, tells Bizz Buzz

Bengaluru: Mergers & acquisitions (M&As) in the technology sector are likely to sustain the current momentum as IT firms, SaaS companies and companies operating in the non-tech sectors are looking at building up their capabilities in the emerging technology space.

According to senior executives of the M&A industry, factors like sound cash reserve position, attractive valuation of target companies & rush to cash in opportunities in the AI (artificial intelligence) space are driving the deal making activities.

“M&A activity has been good in recent years and it is likely to sustain the momentum in coming quarters. From IT services companies to SaaS firms and startups with good round of fund raise are looking at acquiring firms that can push up their revenues or build capabilities in the new technology area. In the IT services space, not only big or mid-tier IT firms, but also small IT companies are acquiring firms,” Maneesh Bhandari, Co-founder and CEO of GrowthPal, told Bizz Buzz.

GrowthPal is an AI-driven platform that leverages data to find target for acquisitions. Its focus is on discovering acquisition opportunities for small to mid-sized enterprises.

According to Bhandari, most of the deals in the technology space are focussed on geographies like the US and Europe.

“Enterprises are looking at companies, which have some presence in the US or have revenues coming from the US. Apart from that, companies in AI, data, and related fields are also being evaluated by enterprises,” Bhandari said.

GrowthPal, which works with many top names of the global IT industry, is also seeing interest for M&As by well-funded startups. Amid tepid demand in the global technology industry, Indian IT firms have been aggressive in the M&A space during last two years.

From large IT firms to mid-tier IT services firms, many acquisitions and strategic investment have been done in recent quarters.

This week, L&T Technology Services said that it would acquire California-based software and artificial intelligence (AI) firm- Intelliswift for $110 million. Notably, Intelliswift services four of the top 5 hyperscalers and caters to over 25 Fortune 500 companies including five of the top 10 ER&D spenders in Software and Technology.

In the last two quarters, Infosys had acquired ‘in-tech’, an engineering R&D services provider focused on the German automotive industry, for around $480 million. It has also acquired InSemi, a provider of semiconductor design and embedded services, for around Rs 280 crore (about $34 million). Similarly, HCL Tech acquired German automotive engineering services company, ASAP Group for $279 million last year.

According to experts, relativeattractive valuation of target firms coupled with the push by IT firms to accelerate revenue growth will drive the momentum in the deal space.