Introduction

The Information Technology Outsourcing (ITO) market is going through multiple changes that impact service delivery models, locations of delivery centers, and market strategies of suppliers. One of the approaches utilized by suppliers to manage these changes is plugging the gaps in their offering through acquisitions of other IT service companies or captive subsidiaries of buyers. The ITO market in the recent past has witnessed a flurry of M&A activities geared to serve various purposes; the evolution of the ITO market is likely to continue driving a need for more M&A in the near future.

Both buyers and suppliers will gain a deep and detailed understanding of the M&A activity in ITO and how it can impact the marketplace.

Scope

• Understanding of the changes in the ITO market and how these changes are driving M&A activities in the industry in both ADM and IO segments
• Examination of the recent M&A activity of the key market players and the drivers behind these pursuits based on the Everest sample of 114 M&A deals since 2004, until September 2008
• Discussion of the future catalysts of M&As in the ITO space

Contents

This report examines mergers and acquisitions in the IT services market. It focuses on identifying the changes in the ITO market that drive suppliers to consider M&As, understanding how suppliers have carried out their M&A mandate in the recent past, and discussing potential future play in the M&A field.

The report also presents extensive analysis of deals since 2004 that form part of the Everest M&A database, offering insights into multiple strategic and financial observations.  Insights include acquisition evaluation matrix, developed to map various ITO suppliers to understand their potential future M&A strategies.

For example, the Overview of M&A in ITO section talks about the following key trends:

• ITO suppliers usually follow one of the two M&A strategies: acquire another IT services supplier or acquire the captive unit of a buyer of outsourcing services
• Acquisitions of other suppliers usually fall into at least one of six themes; “gap in services portfolio” and “industry-specific skill acquisition” are the most prevalent themes and were present in two-thirds of the 114 M&A deals in the last five years, analyzed by the Everest team
• Acquiring a buyer’s operations varies significantly between onshore and offshore captives