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January 14, 2021
The societal impact of the COVID-19 pandemic has been severe with a significant loss of life and far-reaching economic turmoil. From a business perspective, the global shift to remote work and adoption of technology – Cloud, Automation, Artificial Intelligence, etc. – have led to a decade’s worth of transformative change being implemented in a matter of months.
The larger global players across the services market have sought to enhance resiliency by broadening their portfolios of services, creating comprehensive “One-Stop Shop” offerings, with deep sector vertical expertise across industries. These dynamics have supported an aggressive approach to acquisitions in order to fill perceived holes.
Public markets have largely recovered from the initial shock and currently exceed pre-pandemic valuation levels. Private equity remains flush with cash and buyers are looking for growth. These favorable valuation dynamics support robust M&A activity across the business services segment in 2021, especially when factoring in tailwinds from the vaccine rollout and the expectation of a more stable US political environment.
Jacobs’ acquisition of PA Consulting is compelling on numerous levels, representing Jacobs’ expansion into high-end, innovation-focused strategy consulting – while simultaneously facilitating PA’s continued geographic expansion in the US – via an outside-the-box, private equity-like deal structure. Some interesting data points (1):
This transaction reflects the strong demand among the larger global strategic players within the services sector to broaden their portfolios of services across strategy consulting, design, engineering, and digital solutions. The objective is to increase the proportion of wallet share that they capture from their predominantly enterprise client base via a “One-Stop Shop” offering.
Despite the economic impact of COVID-19 on the global economy, M&A activity for the business services segment remained resilient through 2020, especially in North America (2):
Salesforce recently acquired Slack in a $27.7 billion transaction, their largest ever acquisition. Salesforce has been expanding its offerings to include additional enterprise software solutions and their Slack investment represents a significant move towards competing with Microsoft.
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