M&A activity in the Knowledge Economy during Q1 has provided confirmation of the expectations and trends our team expounded in both our 2020/21 Buyer’s Report and M&A Trends Report.
This ever-increasing interest of buyers – and in particular of financial investors – in the Knowledge Economy led to a 10% year-on-year growth in deal volumes during Q1, a total of 1,186 deals, up from total of 1,073 and 1,153 in 2020 and 2019 respectively.
Such activity, hot on the wheels of a 2020 dogged by uncertainty, arrives amid strong valuation tailwinds and record levels of dry powder. Combined, these factors drove an almost 40% year-on-year increase in the number of deals completed by financial buyers.
The market remains bullish and consistent, year-on-year transaction values of $52bn in Q1 20201 (against $51bn in 2020) have been led by a number of mega-deals, including Wipro’s acquisition of Capco for $1.5bn, Hitachi's $9.6bn acquisition of GlobalLogic (~40x EBITDA), and Workday’s acquisition of Peakon for $700m – a multiple figure north of 20x revenue.
Of course, segments differ in their performance throughout the Knowledge Economy, especially across regions. For example, management consulting deals grew in number by almost 50% year-on-year in Europe, despite staying flat or falling elsewhere. The tentative reopening of international travel has helped pave the way for large year-on-year increases to deal volume across the HCM, IT Services and Software sectors in North America. While in Asia Pacific, the overall number of deals stayed flat or fell year-on-year in all sectors except Software, which saw a 60% increase.
After a year of pivoting to develop new, more digital ways of working, the activity of buyers within the Knowledge Economy during Q1 only serves to reaffirm how quickly the market has had to accelerate the digital transformation agenda – and suggests that we can expect the sector to go from strength to strength.