Tech Industry Consolidation Continues Frenzied Pace in Q3 With CDW, Accenture, More
Tech mergers and acquisitions should remain brisk into 2022.
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CDW’s acquisition of Sirius Computer Solutions for $2.5 billion was the most significant acquisition in the third quarter due to the scale and CDW’s dominance in the IT services channel, said CFA’s John Holland. The deal will instantly make CDW a managed services powerhouse.
The acquisition accelerates CDW’s service and solutions capabilities. Moreover, it will enhance capabilities in key growth areas. Those include hybrid infrastructure, security, digital and data innovation, cloud and managed services.
In addition, it will increase opportunities to deepen customer relationships and expand customer reach.
Similarly, the acquisition of IT services firm Trace3 by private equity firm American Securities is significant due to scale, Holland said. Trace3 has roughly $1.4 billion in revenues and roughly 900 employees. Trace3 is an IT consulting firm and Microsoft Azure cloud partner.
Holland cited Comcast Business’ acquisition of software-defined network services provider Masergy as significant. Comcast is bolstering its enterprise and SD-WAN capabilities in the deal. Multiple private equity firms have acquired Masergy over the years. Most recently, Berkshire Partners bought it in 2016.
In terms of technology, IBM’s acquisition of Maryland-based BoxBoat Technologies is significant, Holland said.
“BoxBoat specializes in Kubernetes container solutions in partnership with AWS, Google Cloud and Microsoft Azure,” he said. “Clearly, IBM is betting on the future importance of cloud technology.”
With its 20 acquisitions in the third quarter, Accenture was one of the world’s most acquisitive companies during the quarter. The acquired companies’ specializations are as follows: five in cloud solutions, two in Oracle solutions, two in data analytics, one in cybersecurity, and the rest in a wide range of consulting services.
In September 2020, Accenture announced the formation of Accenture Cloud First involving an investment of $3 billion over three years to expand its $11 billion cloud business. Since then, the company has acquired a multitude of solutions providers that specialize in AWS, Azure, Google Cloud and hybrid cloud solutions. The largest such deals during Q3 were the acquisitions of Germany-based Umlaut, France-based Linkbynet, Switzerland-based Trivades and New York-based CS Technology. In August, Accenture Federal Services completed its acquisition of Novetta, an analytics company with 1,300 employees who serve the U.S. government.
Holland expects M&A activity to continue at the “current amazing pace” into 2022, unless interest rates rise dramatically.
“Low interest rates fuel acquisitions,” he said. “Although interest rates are likely to climb over the next few years, they will likely be low enough to propel acquisitions throughout 2022. Morgan Stanley estimates that private equity firms have a record level of $2.9 trillion of capital at their disposal for acquisitions. Private equity firms will continue searching for high-growth technology services business in which to deploy that capital.”
Holland expects M&A activity to continue at the “current amazing pace” into 2022, unless interest rates rise dramatically.
“Low interest rates fuel acquisitions,” he said. “Although interest rates are likely to climb over the next few years, they will likely be low enough to propel acquisitions throughout 2022. Morgan Stanley estimates that private equity firms have a record level of $2.9 trillion of capital at their disposal for acquisitions. Private equity firms will continue searching for high-growth technology services business in which to deploy that capital.”
Rapid consolidation in the tech industry continued in the third quarter with a number of significant deals. Consider CDW, Proofpoint, McAfee, Accenture and more.
That’s according to the latest Corporate Finance Associates (CFA) quarterly report on M&A in the tech industry. CFA’s investment banking team reviewed the M&A activity of the largest technology services businesses and highlighted the key acquired technologies.
John Holland is the CFA’s managing director.
CFA’s John Holland
“There was an extraordinarily high volume of M&A transactions in [the third quarter of 2021,” he said. “The transactions involved many different types of IT services businesses and telecom services businesses. Specifically, there were a multitude of acquisitions of MSPs and MSSPs. Also, there were many acquisitions of cloud solutions companies. Here is a sample of some of the companies that acquired cloud solutions firms: Accenture, Capgemini, Evoque Data Center Solutions, IBM, Improving, Netrix and SoftwareOne.”
Cybersecurity M&A Heats Up
Among tech industry M&A, CFA observed acquisitions of the full spectrum of cybersecurity businesses, from large cybersecurity software companies to small MSSPs, Holland said.
“On the large side, private equity firm Thoma Bravo acquired Proofpoint, and private equity firm STG acquired McAfee’s enterprise business,” he said. “Also, Avast merged with NortonLifeLock. CDW acquired Tampa-based Focal Point, a cybersecurity solutions provider with roughly 230 employees. On the smaller side, MSSP Cerberus Cyber Sentinel executed its third acquisition of an MSSP since going public in 2020.”
The big accounting firms that provide IT consulting services have been acquiring cybersecurity companies, Holland said. They’re in a rush to grab market share and expertise in this high-growth space.
“[Last quarter], Deloitte acquired three cybersecurity companies, Accenture acquired a French MSSP, PwC’s global subsidiaries acquired two identity management/cybersecurity firms, and an international subsidiary of Ernst & Young acquired a cybersecurity solutions firm. Speaking of consultancies, the large consultancy Booz Allen Hamilton acquired Tracepoint, a cybersecurity digital forensics and incident response provider.”
Scroll through our slideshow for tech industry M&A highlights from the third quarter and a look ahead.
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