IT services and software are success factors in companies
The market for IT services and software in Germany is extremely fragmented. In addition to a few very large players, there are a large number of small to very small companies that occupy attractive niches, particularly in specialist and industry-specific topics. For some years now, there has been an increasing trend toward greater consolidation in the IT market, as company size and breadth of offering as well as supraregional/international presence (possibly also for near-shoring in view of the existing shortage of staff resources and relatively high personnel costs) are increasingly becoming a key competitive factor, especially in the IT sector. in the awarding of contracts by large companies and corporations.
In the hitherto scarcely occupied mid-market segment, entrepreneurial and flexibly/decentrally structured groups of companies are often forming which, among other things, position themselves in the market with specific topics and a broader range of products and services through acquisitions as part of buy-and-build strategies and generate volumes in order to be able to realize comprehensive, possibly international projects/orders for major customers as preferred suppliers. Due to the good economic situation in recent years, especially in the IT environment, many companies have well-filled coffers for this. In addition to national players, large, international IT providers are also increasingly looking to increase their presence in the high-volume and economically attractive German market.
The IT sector was hit late by the crisis years 2008/2009 compared with other industries and also recovered relatively quickly. The strong growth of the IT sector is due not least to the increasing importance of IT as a critical competitive factor for companies, e.g., by increasing efficiency in the face of growing cost pressure, for the successful implementation of rapidly developing Internet-based business models, and for changing forms of communication, such as the Internet. Social media, etc. contributed.
The euro and financial market crisis has hardly affected the industry; after an extremely strong growth year in 2011, sustained high growth of between 5 and 10% is forecast both for 2012 and in the medium term, depending on the industry segment. The economic barometer measured by the industry association Bitkom continues to be well above the Ifo index, and the IT sector is growing considerably faster than the economy as a whole.
According to industry participants and users, the main trends and growth drivers in the enterprise IT environment are as follows
- The development and use of mobile devices and systems in companies with connection to corporate IT and integration into business processes (“mobile business”)
- the provision of software and IT infrastructure by external service providers with usage models based on pay-per-use (“cloud computing” with “software-as-a-service” and “infrastructure-as-a-service”)
- the increasing importance of social media in the business environment as well
- and — in line with the aforementioned trends — the topic of IT security/compliance.
According to the industry’s perception, the main obstacle to growth is the shortage of qualified specialists.
Since the sale of a company is a one-time event and the sellers therefore do not have any experience, it is advisable to prepare well by exchanging experiences with other market participants and attending relevant events on the subject. SAXO Equity as M&A advisor organizes e.g. targeted workshops on the complex of topics. In the search for the “right” buyer, good preparation in the sense of a careful analysis of the market participants in the IT market, which tends to be relatively less transparent or extremely complex, is necessary in order to position oneself correctly on the one hand and on the other hand to find the partner with whom not only the highest strategic but also — especially in the case of service-oriented companies with high importance attached to employee identification and motivation — the cultural fit is given. Numerous preparatory measures also require long lead times. For example, in the event of the subsequent exit of the founders, who usually play a leading role in the company, the timely establishment of a second management level is necessary for the sale of companies — which are usually rather smaller in the IT sector. Similarly, it must be taken into account that appropriate periods of time must be planned for the further development of the company within the framework of earn-out models after the entry of a buyer. As with all M&A transactions, the correct/timely communication of the transaction logic and benefits to employees as well as any necessary integration steps must also be prepared.