The first half of 2024 saw 364 deals announced in UK Tech M&A, a jump of 14% from H2 last year. With equity markets remaining strong, and interest rates looking set to fall, confidence has rebuilt in the M&A market, reveals ICON's UK Tech M&A Snapshot H1 2024.
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With cybersecurity public market and deal activity firmly back in the headlines, we are pleased to publish our latest cybersecurity sector report. Whilst stock markets have turned a corner, boosting M&A activity, fundraising is still lagging behind historic trends. In this report, we discuss the sector fundamentals and spotlight key investment themes, players, and valuation dynamics, focusing on the European market.
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UK Tech deals are showing real signs of recovery. With 193 deals closing in Q124, the number of M&A deals has risen for the second quarter in a row, reveals ICON's latest UK Tech M&A Snapshot. Having reached a low of 151 deals in Q323, the number of UK deals grew in Q423 and now again in Q124, up 16% quarter on quarter. That is nearly back to pre-COVID deal levels. Find out more detail from Q124 in our latest snapshot.
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Having impressively grown from start up to $9bn revenues in 20 years, ServiceNow has created huge, ongoing demand for specialists in its Partner ecosystem. That has fed strong demand for M&A activity amongst ServiceNow Partners who are in a hurry, with over 78 deals in the past 5 years. Interestingly, there was a big jump in ServiceNow Partner deals in UK in 2023 with the sale of Unifi, Sapphire, Proceed, Whyaye and Cloud Stratex. Our report looks into the M&A activity in the sector to see who is buying. Biggest serial acquirers include Accenture, EY and DXC.
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In 4Q23 we saw a considerable jump in equity markets and a small rise in M&A deals as investors re-assessed the future direction of interest rates. The rise from zero to 5% interest rates was incredibly quick. No one expects free money to return anytime soon but rates should drop in 2024. That is an encouraging backdrop. As a result, many advisers are expecting a bounce in M&A activity this year on the back of the growing market confidence. That seems to be happening on the ground, with ICON seeing a step change in new enquiries in Q1. That is all good, but what are UK Tech buyers really thinking? What is the appetite of buyers? We thought we would try and find out from the horse's mouth.
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Tech CEOs, VCs, corporate development personnel & lawyers alike are expecting a significant uptick in M&A activity in 2024. Our own conversations just in the past couple months point to a major change in sentiment. We expect an increase in activity among all acquirer classes, from publicly traded strategics, to PE & growth equity financial acquirers, sponsor-backed platforms & even an increase in unicorn M&A. To that end, ICON has decided to openly share our proprietary playbook that has been proven to yield premium M&A valuations.
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The Year of the Rabbit was full of surprises! Quite a few of them were negatives – mainly geo-politics. But there were also many positives, including a big tech-driven jump in the NASDAQ in 2023, which was up an amazing 43%. Crucially, a big fall in inflation means interest rates should pivot in 2024. That, and much excitement around generative AI, means Tech M&A confidence is on the rise.
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ICON's UK IT Managed Services (ITMS) Snapshot shows that buyers have remained very active, with nearly 60 M&A deals closed in the sector so far in 2023. Highlights from the snapshot, which shows all the buyers and valuations, include: strategic buyers from adjacent sectors accounted for a chunky 61% of deals; foreign buyers account for less than one in four deals, and perhaps surprisingly, with the higher interest rates, over 50% of deals were still private equity related. We remain very active in the sector and continue to see really good buyer interest, which is great for building competitive tension. As a result, we see the better quality targets are still achieving >10x EBITDA.
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