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Business Services M&A Market Trends

Business Services continued to be an active segment of the M&A market. Through year-end 2020, the sector witnessed 15 megadeals (transactions exceeding $1 billion), down from 16 megadeals in the prior year. Interest in the sector sustained a median enterprise value (EV)/revenue multiple of 1.5x, unchanged from 2019, while the median EV/EBITDA multiple decreased to 9.8x from 11.7x in 2019. Both strategic and private equity (PE) buyers remained active in the space despite the impact from COVID-19. M&A transaction volume weakened in 2020 as global Business Services market participants were forced to navigate changes in delivery service models and pivot strategic direction to circumvent the impact of virtual environments. We expect this trend to improve as remote capabilities are enhanced and M&A volume as well as valuations trend upwards through Q1 2021.


X Transaction activity in the U.S. Business Services M&A market through year-end 2020 fell slightly against transaction volume through 2019, down 4% YoY.


X In total, there were 952 announced deals in the sector involving U.S. headquartered targets, but the market lagged 2019 announced transactions.


X Both strategic and private equity buyers remained active despite the effects of COVID-19’s impact throughout 2020.


Total reported deal value fell through year-end 2020 compared to deal value transacted in 2019.


X The total reported deal value in 2020 was $66 billion, or 17% below the prior year level.


X There were 15 megadeals (transactions exceeding $1 billion) in 2020, down from 16 megadeals at year-end 2019.


X Intercontinental Exchange, Inc. (NYSE:ICE) acquired an IT services firm for $11B as the largest U.S. M&A deal announced through year-end 2020 in the sector.


While aggregate transaction value fell, revenue multiples stayed flat as both strategic and PE buyers sought to acquire quality assets.


X The median reported EV/EBITDA multiple decreased through year-end 2020 to 9.8x from 11.7x in 2019 reflecting challenging headwinds faced by Business Services companies.


X Despite substantial PE dry powder and corporate access to capital, buyers have become more selective, seeking predictable cash flow business models.


Please contact Matt at DelMorgan & Co. if you want to discuss your investment banking needs via email at mas@delmorganco.com.




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