In this edition: IT services M&A sets all-time record. Kyndryl spinoff spins up this week. Eighth largest U.S. city signs $84 million ADM extension. Accenture acquires financial services consulting firm.
Did someone forward you this briefing? If so, subscribe here to get a copy of the Insider in your inbox each Friday.
M&A UPDATE
This quarter broke the record for number of IT services acquisitions in a year (see Data Watch). Year to date, there have been 143 transactions, breaking the record of 142 set in 2017. At this pace, we’re likely to see a total of more than 180 deals by the end of the year.
The total value of acquisitions to date is $13.6 billion. This compares to a total of $10.1 billion in 2020 and $17.9 billion in 2019. What’s interesting is that – unless there is a blockbuster in the next two months – we’re likely to end up with a similar total value as in 2019, but with almost 30% more transactions.
As we’ve discussed, the market for cloud, security and engineering capabilities is red hot. With interest rates still at all-time lows and talent at a premium, many service providers are finding that the fastest path to growth – at least for now – is via M&A.
DATA WATCH
KYNDRYL SPINOFF
My colleague and fellow Insider Mrinal Rai wrote about the proposed spinoff of IBM “NewCo” back in October of last year (which feels like a lifetime ago!). That day has come and Kyndryl, now traded under “KD” on the NYSE, is officially its own entity.
We’re tracking this closely as IBM – and now Kyndryl – both have a huge amount of influence on the performance of our market. On its own, Kyndryl is still a juggernaut: around $19 billion in revenue, 88,000 employees and 4,000 customers.
That said, the next two years will be pivotal for both firms. Around 200 IBM managed services awards will come up for renewal in the next 24 months – this represents about $34 billion in TCV across both firms. If you extract from that the awards that spin off with Kyndryl – broadly those with data center, mainframe, midrange, and storage in scope – that’s approximately 100 awards with $26 billion in TCV.
DEAL ACTIVITY
- City of San Diego and CGI. Eighth largest city in the U.S. signs four-year, $84 million ADM extension (link).
- Celcom Axiata Berhad and TCS. Malaysian telecommunications firm modernizing with TCS platforms (link).
- East Sussex County, Oracle and Infosys. U.K. county authority modernizing finance and HR systems (link).
M&A ACTIVITY
- Accenture acquires U.K. financial services consulting firm BCS Consulting (link).
About the author
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
