March 27, 2024
By Hamish Morrison and Andy Haigh, Partners at Translink UK
Translink Corporate Finance is proud to present its Translink Corporate Finance IT Services Index for Q1 of 2024, looking at listed valuations across three dynamic IT subsectors. Following the Covid-19 boom correction, listed valuations have settled and moved into a phase of upward momentum. In the report, Translink experts unpack the current state of business valuations in the sector, examining key trends for listed businesses with a market capitalisation of c.€50m up to c.€100bn.
The index serves as a vital tool for monitoring global valuations trends within the sector and its subsectors, giving critical insights in the ever-evolving landscape. The report has been compiled from public information sources and other reputable sources. While it is not exhaustive, it presents a robust picture of the state of play, enabling Translink experts to spot key trends and forecast future valuations movements.
The current state of play
Growth has been harder to achieve in recent years stemming from a myriad of macroeconomic factors, from global wars to high inflation, and the residual aftermath of the pandemic. Uncertainty has impacted financial performance, however, there’s evidence of recovery. Declining profit warnings and peaking inflation and interest rates are positively impacting listed company valuations in the mid-market and smaller end of the large-cap market.
Top tech trends shaping the sector
The report delves into the tech trends influencing the future of the sector, identifying these as:
- Artificial intelligence and machine learning
- Blockchain technology
- Cloud computing
- The Internet of Things
- Edge computing
- Cybersecurity mesh
- Quantum computing
Given their profound implications, these will inevitably impact listed companies now and in the future, prompting skills gaps, and data and security concerns – but also, phenomenal opportunities for operational streamlining and expansion.
Valuations per subsector
Translink deep dived into three subsectors, looking at listed valuation trends and the factors driving demand.
- Digital Consultancy & Transformation: Following a post-Covid-19 correction, valuations are now broadly in line with longer-term pre-pandemic levels, indicating a consistent approach to valuation across the sector.
- General IT Services: Saw increases in 2021, followed by a post Covid-19 correction. The subsector is now experiencing an uptick in valuation multiples, supported by long-term structural growth trends in the market.
- Hosting: Initial caution at the start of Covid-19 was soon replaced by substantial growth in valuations as investor confidence in the sector grew. As the period of hyper growth was followed by more modest growth, earnings forecasts were downgraded and valuations, whilst remaining high relative to the other subsectors, reduced accordingly.
These are unpacked further in the report.
Forecasts for 2024
The Translink CF team is cautiously optimistic the sector’s growth will continue, given the rapid rise of technological development and adoption, and increased need for digitisation.
Translink CF experts are perfectly positioned to help clients navigate the rapidly evolving IT landscape, with deep sector-specific expertise and an expansive global footprint. Translink CF gets the deal done.
