Driven by private equity roll‐ups chasing scale, public companies choosing only high‐impact bolt‐ons, and the hype (and reality) of GenAI’s influence on valuations, 2024 was a banner year for mergers and acquisitions in the technology services sector.
Accordingly, the insights found in EY’s latest deep dive into 2024’s technology‐services M&A can serve as a practical roadmap for what to watch and how to adapt in 2025.
In 2024, technology-services M&A surged to roughly 850 transactions and over $30 billion in announced value. But private equity’s rapid-fire roll-ups, measured public-company activity, and a wave of “GenAI” buzz suggest this boom may reflect opportunistic positioning as much as sustainable expansion.
More than half of all 2024 transactions received PE backing, up from 45 percent in 2023—driven by an aggressive appetite for scale. Roll-ups climbed from about a quarter of deals to nearly 40 percent in a single year. Bundling specialized cloud-consulting boutiques or AI-focused service firms into larger platforms promises broader reach, streamlined operations, and stronger pricing power on paper. In practice, integration often reveals mixed cultures, overlapping service lines, and inflated cost structures that require years of fine-tuning to address. PE firms paying premiums on the assumption of seamless consolidation may find that integration complexities reshape financial engineering into a steep climb rather than a smooth ascent.
Public-market acquirers followed a more deliberate path, the report shows. Listed IT services companies completed about 55 deals in 2024 (up slightly from 46 in 2023), which underscores their preference for selective bolt-ons that fill specific technology gaps or expand regional footprints. This pragmatic approach stands in contrast to the mid-market deal frenzy, reflecting a balance sheet focus on resilience. With digital transformation budgets under pressure, corporate buyers have prioritized stability over large-scale mergers and acquisitions (M&A), preserving capital for high-conviction investments rather than broad-sector roll-ups.
IT spending patterns reinforce that strategic caution. Overall budgets in 2024 showed minimal change from the previous year despite an increase in deal activity. Enterprises continued to modernize applications and invest in data analytics services—but only with clear, measurable returns. A $10 million AI integration had to demonstrate rapid ROI before executives greenlit it. In that environment, cross-sell synergies become essential; stitching complementary service lines together hinges on CIOs allocating discretionary funds to new initiatives. When executives pause before committing to unproven projects, freshly merged offerings risk underutilization faster than teams can align go-to-market strategies.
Dozens of 2024 deals explicitly marketed “AI-driven solutions” or “GenAI-enabled analytics.” Yet, many proof-of-concept projects remain at an early stage, and enterprises continue to clarify their real-world applications. When clear near-term use cases and dedicated AI budgets remain elusive, and clients lack complete visibility into the complexity of integration, “AI” labels often fall short of expectations. Embedding GenAI into M&A spike stories has elevated valuations, but service pipelines still await validation at scale.
An assessment of the first half of 2025 likely will reveal whether 2024’s momentum represents a proper market reset or a rebound from muted dealmaking in 2023. Will IT budgets expand enough to absorb an influx of newly consolidated services? Can PE platforms deliver on three-year synergy plans without diluting core capabilities? Will GenAI progress from a marketing tagline to practical enterprise adoption? If market dynamics favor cautious redeployment of capital over aggressive acquisitions, expect activity to recalibrate—fewer headline-grabbing deals, more focused tuck-ins, and renewed emphasis on organic R&D and talent development.