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Digital Services – Q1 2018 Market Review

By Jon Tingling 13 Apr 2018

Welcome to the Q1 2018 edition of our Digital Services market review – Results International’s quarterly market update for the Digital Services segment. The Digital Services sectors we track in this market overview include (i) Data and  Analytics, (ii) Strategy, UX, Design and  Build, (iii) Bespoke Software and  Systems Integration, (iv) eCommerce and (v) Mobile App Development. We cover the broader advertising and marketing services market in our quarterly infographics which you can find here.

 

The first quarter of 2018 saw an increased total of 97 deals announced, up from the 75 deals recorded in Q4 2017. Bespoke Software and  Systems Integration (57) was the most active Digital Services subsector, followed by Strategy, UX, Design & Build (18), eCommerce (8), Mobile App Development (7), and Data and  Analytics (7). The public markets in IT/ Consulting Services and Marketing Communications tracked up 2.5% and 0.2% respectively this quarter, straddling the Nasdaq’s comparative 0.8% gain over the same period. Marketing Services in the public markets have had a volatile quarter (down 12.5% over the previous twelve months); highlighted by WPP and other large agencies’ struggle with challenging conditions. The IT/ Consulting Services index was up 10.5%, driven in part by Tech Mahindra and Unisys.

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IT/ consulting services providers remained acquisitive across the space with the listed German KPS AG completing two acquisitions (Infront Consulting Group, a Canadian Microsoft systems integrator, and Envoy Digital a UK based eCommerce development agency). Two large deals headlined the quarter: NEC Corporation strengthened their international operations with their acquisition of Northgate Public Services, a diversified IT services, software development and data management group for £475M, while Capgemini acquired LiquidHub, a US based CRM, digital marketing and project management software systems integrator for $495M. The latter is seen as a significant move by Capgemini deeper into the same space as Accenture Interactive and Deloitte Digital have been actively growing inorganically.

Cloud service integrations remain an active space, highlighted by EY’s acquisition of Sonoma Partners (a Microsoft Dynamics integration consultancy), and Deloitte’s acquisition of API (an Amazon Web Services integration consultancy). Vertical acquisitions from focused groups such as RE/MAX (acquired Surge, a website specialist for real estate brokerages) and Cars.com (acquired Launch Digital, a website development specialist for auto dealers) reflect a continued interest to the digital services sector from non traditional buyers, as private equity and traditional buyers remain acquisitive.

We expect the buyer universe to continue to expand into Q2 and beyond as the sector continues to evolve, and the need for digital transformation increasingly becomes a strategic requirement. As a result, now is a good time to be contemplating fundraising, exit or growth through acquisitions in the digital services space – if you are, please do get in touch.

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Jon Tingling

Associate

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