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Digital Horizon – 2018 Market Review

By Jon Tingling 16 Jan 2019

Welcome to the 2018 full year edition of the Digital Horizon Market Review – Results International’s quarterly market update for the digital services sector. The digital services subsectors we track in this market overview include (i) strategy, UX, design and build, (ii) data and analytics, (iii) bespoke software and systems integration, (iv) eCommerce and (v) mobile app development. We cover the broader marketing services market in our quarterly infographics which you can find here.

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  • There was widespread digital transformation across all aspects of the enterprise, and across traditionally offline or integrated sectors which continues to drive strong M&A activity as existing players and new entrants fill missing capabilities and compete to capture as much of clients’ digital transformation budget as possible. Supported by acquirers’ strong balance sheets amidst an ongoing bull market, low interest rates and record levels of private equity capital, 2018 was a very strong year with a record 429 deals completed across the sectors we track (an increase of 31% on 2017).
  • Massive growth in Amazon’s AWS cloud Infrastructure-as-a-Service and Microsoft’s Azure, among a long tail of other cloud providers, has driven huge demand for complementary service providers and those with broader digital transformative skills, as enterprises are migrating systems off-premise or moving to hybrid models at increasing rates.
  • System integrators and diversified technology services businesses continued to build capability and geographic presence to support their clients’ digital transformation agendas. NEC, CapGemini, Atos, and Accenture were the most prolific acquirers in the space, highlighted by the former’s acquisition of Kaplan, a Nordic based marketing technology consultancy, to which Results International acted as exclusive financial adviser.

Predictions for 2019:

  • As cloud adoption continues at an increased pace, and AI, machine learning and intelligent automation technologies move into the mainstream, we expect that consultancies, networks and private equity investors will continue to vie aggressively for firms with scaled skills in specialised, value added areas in the digital services space, in order to capitalise on the massive opportunity the sector presents. Results International acted as exclusive financial advisor to both Symphony Ventures, a Robotic Process Automation (RPA) provider on its sale to SYKES, a large BPO provider, and to RedPixie, an Azure hybrid cloud consultancy, on their sale to HPE, highlighting this trend.
  • We anticipate that in 2019, we will continue to see more nimble upstarts in Marketing Communications (such as former WPP Chief Martin Sorrell’s S4 Capital) challenge the large networks for prized acquisitions, as the networks learn to thrive in a media environment increasingly dictated by Silicon Valley, rather than legacy publishers and content providers. Sorrell, fresh off his $150m acquisition of MightyHive (a San Francisco based programmatic agency), quipped that “Clients… want services delivered faster, better and cheaper, by more agile and responsive organisations”; a veiled put-down of his former employer and other giants.

The digital services sectors remain active with a wide buyer universe, and the outlook is exciting. As such, now is a good time to be contemplating fundraising, exit, or growth through acquisition in the digital services space – if you are, please do get in touch.

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Jon Tingling

Associate

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