SITS Market Review Q1 2022

Gambit’s Software and IT Services (SITS) Market Review for Q122 evidences historically high levels of UK SITS M&A activity despite temporary, geopolitical volatility, lingering Covid-19 uncertainty and macroeconomic headwinds.

SITS sector deal volumes remained resilient compared with Q421, increasing 1%, underpinned by strong market sentiment and positive trading performance of asset-light and highly scalable business models which have previously navigated volatile market conditions.

Market volatility and subdued sentiment driven by unstable geopolitical conditions has resulted in a short-term retraction in valuation multiples. Gambit’s SITS valuation index demonstrated a 16% decrease in EV/EBITDA multiples to 18.5x from Q421 to Q122, however valuations remain 11% above pre-pandemic levels in Q120. In the medium to long-term the Ukraine/Russia conflict will catalyse SITS sector M&A, driving demand for robust cyber security infrastructure and consultancy.

Leading mid-market and SME SITS companies with evolving use-cases are attracting elevated attention from market consolidators, with acquirers focusing on smaller and more agile targets with scalability and cross-border opportunities.

Opportunistic consolidators are primed to capitalise on the short-term 16% reduction in sector EV/EBITDA valuation multiples, illustrated by Gambit’s SITS Valuation Index. Strategic and financial acquirers are seeking to augment growth, diversify capabilities and deploy capital via SITS M&A opportunities to enhance long-term shareholder value.

If you would like to arrange a call to discuss the opportunities facing your business or to understand the most appropriate solutions to support your shareholders’ needs and ambitions, please contact a member of the team.

To read the full report, click here.

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