Companies targeting acquisitions in the communications and IT sectors have a “high level of underlying confidence”, despite a significant dip in activity at the start of 2025, with new research revealing that M&A is still a central part of their growth strategies.
Boutique advisory firm Knight Corporate Finance surveyed more than 30 buyers across the MSP, communications and cloud services markets, with the poll finding that 77 per cent had completed at least one transaction in the past year.
A large majority of buyers polled (93 per cent) stated that they were looking to complete an acquisition over the coming year, with 70 per cent saying they were hoping to complete multiple deals.
83 per cent of respondents said that they had debt facilities and/or sufficient cash reserves to fund their M&A activity. Most buyers (86 per cent) revealed that they were actively looking for the “right” acquisition, while the remainder demonstrated intent to do deals, albeit on a more opportunistic basis.
This confidence and appetite for M&A comes in spite of the sectors recording the lowest number of deals for three years during the first quarter of 2025.
Knight founder and director Paul Billingham said that, while the climate had been “challenging” over the past year, the firm had “still seen good activity within the market”.
He continued: "Across the market, we have seen a downturn in deal activity, but our view is that the quality threshold for completed deals has been higher, as opposed to acquirers pulling out of the market."
Buyers were also polled regarding their acquisition criteria. 24 per cent of respondents said that increasing EBITDA was the most important factor in targeting deals, while 62 per cent cited organic growth opportunities, a position in a vertical market or expertise in a new technology as their major deal drivers.
Billingham said that the survey demonstrated that buy and build is not simply a case of “acquiring a company and slashing costs to increase profit” and that "acquiring new skills” through M&A has been vital for buyers to remain competitive and relevant to customers.
He added: "Organic growth is the ultimate key value driver and ensuring their team has the right customer proposition is key to achieving this. It was interesting and positive to note that 21 per cent of buyers told us that the quality of people was a key driver for making an acquisition.”
Discussing the overall state of dealmaking in the industry, Billingham said that, based on daily conversations with “buyers, funders and private equity investors”, Knight Corporate know there is “strong appetite for M&A”.
He added that, given “economic uncertainty in the UK and around the world”, the downturn seen at the beginning of 2025 was unsurprising, but asserted that “there is a consensus and desire to continue to invest in dynamic channel businesses and the incredible array of skills that they have developed."
M&A can be vital in helping businesses to secure growth during times of economic uncertainty. Find out more in these in-depth insights:
Finding M&A value in an economic downturn
As confidence dips, M&A can be vital in helping UK SMEs to attain growth
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