Gambit Corporate Finance is pleased to publish its latest market insight, which examines the prominent trends facing the SITS sector over the next year, analysing their recent impact on the industry and how they will likely remain strong drivers for M&A activity.
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Key Trends: Summary
Digital Transformation and Adoption of Emerging Technologies
The pandemic has accelerated the need for organisations to undertake digital transformation strategies, particularly by means of adopting emerging, scalable technologies. End users will increasingly employ IT consultancies to ensure optimal integration of future technologies as they come to market. Organisations cannot be left behind in the rapidly evolving digital age. Emerging technology providers have an opportunity to increase market share and augment growth plans by leveraging the increased desire from end users to implement these new technologies.
Nearshoring and Offshoring
Nearshoring and offshoring gained considerable popularity in 2021 and are set to gather further momentum in 2022, as SITS companies seek to mitigate the challenges associated with the ongoing shortage of skilled labour in the sector. Obtaining high-calibre talent in international regions with lower labour costs will help alleviate the tightening of margins beginning to be witnessed in the industry, driven by heightened competition amongst SITS providers and new market entrants in recent years.
Capital providers are aligning their portfolios with economically resilient verticals. The SITS sector has not only demonstrated resilience to the pandemic, but notable subsectors such as enterprise software have witnessed accelerated growth in market share and profitability driven by widespread digital adoption. Record levels of dry powder amongst private equity and venture capital funds, coupled with a low interest rate environment will provide substantial opportunity for SITS companies to accelerate their growth plans by strategically leveraging low cost capital and implementing aggressive buy-and-build strategies to support existing portfolio companies.
Environmental & Social Governance
ESG matters are anticipated to move towards the forefront of corporate agendas in 2022, presenting a key consideration amongst stakeholders with regards to both business operations and corporate finance activities. The rise of ESG is being driven by social and investor pressures, tightening legislation and regulation placing an emphasis on employee satisfaction and compliance. Although still in the earlier stages of adoption, ESG will present value enhancement opportunities for SITS companies evidencing sustainable practices.