BUSINESS SERVICES MARKET INSIGHTS
- Cloud Consulting projected to make up 14.2% of the total global IT enterprise spending market in 2024, up from 9.1% in 2020
- A study shows more than 20% of the workforce could work remotely three to five days a week as effectively as they could if working from an office
- The global professional services market is expected to grow from $5.2 trillion in 2020 to $5.4 trillion in 2021
While total M&A activity in the space decreased approximately 16% in 2020 as compared to 2019, activity is expected to rebound in 2021. Several factors are expected to influence M&A activity, including the increased desire to own a full-service, business services platform, future tax uncertainty with the new Administration in Washington, and a buildup of dry powder on investor’s balance sheets caused by the cash preservation strategies adopted by many during the pandemic.
Although valuations increased in late fall 2020 due to COVID-19 resiliency and other market factors, the markets are expected to normalize in 2021. Companies in the business services sector will begin to trade at Enterprise Value/EBITDA (“EV/EBITDA”) multiples consistent with where they were pre-pandemic. Public company valuations have risen during the pandemic and public companies now trade at average multiples of 14.4x to 18.8x.