IT Services Valuations and M&A 2025 Outlook – Recap of our Exclusive Webinar

On May 20, 2025, we hosted a live webinar titled “IT Services M&A in 2025 – Insights for Founders & Acquirers?”. The webinar was presented by Marcin Majewski, Managing Director and Filip Drazdou, Associate. They covered important topics for IT services founders and acquirers such as:

• IT Services valuations today: Public & private markets
• IT Services valuations – size and geography effect
• 2025 outlook for IT Services valuations
• How can founders prepare for a successful exit in 2025
• How to maximize value of your IT Services business

You can now watch the full webinar replay below. If you would like to download the presentation material used during the session, you can easily do so by clicking the download report button on the left (if you are using a computer) or by scrolling at the very end (if you’re using a phone).

Below is the full transcript of the discussion, edited slightly for clarity, flow, and briefness.

Marcin:
Hello, and welcome to our IT Services webinar. I’m joined here today by Filip.

We’re Aventis Advisors, an M&A advisory firm, and we’re excited to welcome everyone who’s interested in learning more about current trends in IT services valuations—specifically:

• What the most recent trends in valuation multiples are
• The key drivers of these valuations
• How to maximize gains from a potential investment or exit in an IT services company

We’re proud to be sharing our insights in this webinar format for the second time. A month ago, we hosted a webinar on SaaS valuations, which received very positive feedback. We enjoyed the experience, and we’re happy to be back—this time speaking to a slightly different audience. It’s also great to see that some of you have returned to join us again.

We find it incredibly satisfying to analyze the numbers, understand the forces behind them, and make sense of what’s happening in the market. But most importantly, we’re here to share this knowledge so you can make informed decisions.

These decisions can be life-changing—from determining whether and when to sell a business, to evaluating the right investment strategy and timing your exit effectively.

With that, I’ll hand it over to Filip to present today’s agenda. Let’s dive in.

Filip Drazdou:
Hi everyone, and welcome to our second webinar focused on IT services. Today, we’re going to cover a mix of topics: a bit about valuations and a bit about preparing for exits.

Here’s what we have planned:

1. Current Valuation Landscape – We’ll begin by discussing where IT services firm valuations stand today and our outlook for 2025.
2. Drivers of Valuation Differences – We’ll talk about what drives the variation in valuations, particularly looking at company size and geographic location.
3. Exit Preparation – Finally, we’ll offer guidance useful for both founders looking to sell their businesses and acquirers seeking to invest, focusing on how to prepare for an exit and maximize valuation. For buyers, we’ll also touch on how to identify and evaluate the right acquisition targets.

Marcin, do you want to kick things off with some headline numbers?

IT Services EV/EBITDA valuation multiples

Marcin:
Yes, this is my favorite chart of the day.

It compares two main metrics:

1. EV/EBITDA multiples of publicly listed companies
2. EV/EBITDA multiples in private M&A deals

We’ve tracked this data all the way back to 2015 to better understand long-term trends in valuations and how they have evolved.

Now, for some people—like you, Filip—this chart might look stable. But to me, it actually shows a fair amount of volatility. Still, relative to other sectors, IT services valuations have been relatively stable—especially when compared to something like SaaS.

Over the past two years, however, we’ve seen some meaningful fluctuations. The most prominent shift occurred during the COVID-19 boom. Prior to that, valuations were already strong, particularly during a period of declining interest rates.

As with much of the market, interest rates are a major driver of valuation trends:

• When interest rates fall, valuations tend to rise
• When interest rates rise, valuations typically decline

We’ve also observed a strong correlation between the valuations of private M&A deals and those of publicly listed companies.

There’s an interesting anomaly in our data from 2023, where private deals appear to be valued higher than public companies. We believe this is due to a lag between when deals were negotiated and when they were actually closed. Many of these deals were likely initiated earlier, but only finalized and recorded in 2023.

Broadly speaking, we agree that valuations peaked around late 2021 to early 2022. Since then, we’ve seen a stabilization around 9–10x EBITDA.

That said, we’ll discuss later in the session some downside risks that may still be ahead.

Marcin:
Let’s move on to the next slide. Filip, besides interest rates, what do you think drives valuations in this space?

IT Services Valuation Drivers: Revenue growth

Similar to what we observe in the software sector, the biggest driver of valuations in IT services is the revenue growth rate. If you look at what’s happened over the past 10 years—especially during periods of major change—you’ll see this very clearly.

Between 2015 and 2018, there was a modest increase in valuation multiples from about 8x EBITDA to 12x. But the most significant spike occurred when valuations jumped from around 7x EBITDA to 14x.

This sharp increase was entirely driven by accelerated revenue growth during the pandemic. At that time, there was a surge in digitalization—companies everywhere were investing heavily in digital transformation, cloud services, video conferencing tools like Zoom, and more.

That boom in demand translated into substantial revenue growth, which in turn drove up valuations. Many investors assumed that this elevated growth would continue indefinitely. However, growth eventually normalized and dropped back to around 5%, which is close to pre-COVID levels.

This shows that the spike in valuations was a one-time event, and as growth slowed, so did valuations. When we look at our sample of companies, it’s clear that revenue growth largely explains the changes in valuation over time.

Looking ahead, valuation performance will depend on whether revenue growth picks up again or stays at the current, more modest level.

Another important factor we want to highlight is the EBITDA margin. While growth plays a crucial role, it’s worth asking: what’s happening with profitability?

Interestingly, EBITDA margins have remained remarkably stable, increasing by only a few percentage points over the last decade. This reinforces the point that revenue growth, not margin expansion, is the main explanation for valuation shifts.

To clarify: EBITDA margin affects how much actual profit is being generated, but when it comes to valuation multiples, what matters is how much buyers are willing to pay for each dollar of EBITDA. For example, whether your margin is 10% or 15%, if you’re generating $1 of EBITDA, buyers may still be willing to pay $9 for it. The multiple doesn’t change much based on margin alone.

Marcin:
That’s true—but it’s still important to remember that EBITDA is the core basis for valuation, so we shouldn’t neglect it.

Growth is clearly important, but in our experience advising clients, IT services companies are ultimately valued on their EBITDA, not on their revenue. For example, we’ve seen some cloud service companies that try to push for revenue-based valuations, often citing high growth.

But in practice, these deals rarely close—especially when the company lacks strong EBITDA. There’s no sign that we’re returning to the kind of valuations we saw during the COVID boom.

From our current deal-making experience, businesses with little or no EBITDA are extremely hard to sell in today’s environment.

IT Services Valuations – 2025 outlook

Filip Drazdou:

Let’s move on to the 2025 outlook.

We’ve pulled together a few data points showing where growth currently stands and what various analysts—including ourselves—expect going forward.

Before diving into Aventis’ bull and bear case scenarios, let’s look at the external forecasts.

The dashed line on our chart represents what stock market analysts are predicting for revenue growth. It’s fairly typical: they expect the next quarter to be a bit weaker, followed by a recovery toward 8% annual growth.

Gartner’s forecast for IT services is also optimistic—around 9% revenue growth this year.
That said, last year they projected 8.7%, but actual growth came in at about 5.5%. So it’s worth taking these projections with a grain of salt.

Now, Marcin—if you had to argue a bear case, what would your key points be?

Bear Case Scenario

Marcin:
Yes, I find myself leaning toward a bearish view in the current market.

Despite projected growth, there are significant macro risks that make investors cautious—whether they’re acquiring private companies or investing in public markets. This uncertainty puts downward pressure on valuations.

We’re also seeing more underperforming companies coming to market. The market needs time to filter out these weaker businesses, and those transactions will inevitably happen at lower multiples.

So my view is that we’ll experience a period of muted valuations as the market resets. Once that process is complete, valuations can recover and move higher again.

But Filip, I know you’re more optimistic. How would you frame the bullish case?

Bull Case Scenario

Filip Drazdou:
To make a bullish case, I’d focus on two main points: industry cycles and the impact of AI.

First, looking at cycles—we’ve seen a period of downsizing in the IT services sector. Many companies hired aggressively during the COVID boom. When demand declined, they were left with a large bench of unutilized staff.

That led to cost optimization and workforce reductions. Now, two years later, most companies have already adjusted and are starting 2025 in a much leaner, healthier position.

The labor market has also improved. If demand spikes again, it’s now easier to hire and scale.

Second, and perhaps more importantly: AI is a game-changer. We’re entering a phase of AI transformation, which benefits IT services companies in two ways:

1. Revenue growth – There’s increasing demand for implementation services like custom GPTs, chatbots, AI-enhanced APIs, and process automation.
2. Cost efficiencies – Development cycles are faster and cheaper, boosting margins.

If this transformation materializes as expected, both revenue and profitability will benefit. In that case, the current valuation levels could move higher—possibly returning to 2018 levels of around 12x EBITDA.

Marcin:
I definitely hope that scenario plays out.

IT Services Valuations – Geography effect

Filip Drazdou:
Let’s shift to another factor: how geography impacts valuations.

Marcin:
Yes, it’s fascinating how companies operating in the same industry can be valued so differently based on geography. And frankly, it’s not always rational—but it’s a consistent trend.

Over the last decade, we’ve seen valuation trajectories diverge across regions.

What really stands out is India. It’s a major outsourcing hub for IT services, but it’s also currently experiencing a stock market bubble.

Public valuations for Indian IT companies are more than double the averages in Europe or the rest of the world—and nearly double those in North America.

Interestingly, North American valuations have been declining and are now aligning more closely with European ones.

Even in private markets, India commands a valuation premium—close to 19x EBITDA. This creates a strong arbitrage opportunity:
Buy in one region and consolidate or sell in another with higher multiples.

At Aventis, we actively try to bridge cross-border opportunities like this to create win-win outcomes for both sellers and investors.

While some convergence of valuations is occurring, the current regional differences are still substantial, and we expect this trend to continue—at least in the near term.

Filip Drazdou:
It’s worth noting that growth rates alone don’t explain these valuation differences. For example:

• India’s growth rate is around 6.6%
• Europe: 4.8%
• North America: just 0.5%

So India’s growth edge doesn’t fully justify its double valuation multiples. This suggests that some Indian public company valuations—particularly the largest firms—may have room to come down.

How to prepare for an exit?

Long-Term – Impact of AI on IT Services

Filip Drazdou:
To wrap up, we want to share our thoughts on how to prepare for an exit, with a breakdown into long-term, medium-term, and short-term actions.

Starting with the long-term, a major theme is of course AI transformation—a hot topic across the industry.

Within IT services, some businesses will need to fundamentally transform their models, while others will prove more resilient.

AI reduces the cost of development, and that creates a paradox for traditional time-and-material models, which rely on billing developer hours. On the surface, that suggests a reduction in revenue. However, it’s also possible that the same teams will be able to deliver 10x more software output, maintaining value by doing more in the same amount of time.

Still, this evolution isn’t certain. We’re not claiming to be AI prophets, but it’s clear that some IT services companies will be affected more than others.

A key factor is the availability of training data for AI. If you’re building something common—like restaurant apps or e-commerce sites—AI models have seen plenty of similar examples and can generate solid code. These companies will be under more pressure to transform.

In contrast, firms building complex, proprietary systems—like compliance tools for banks—are less likely to be affected because AI lacks training data for these unique use cases.

Likely candidates for disruption include:

• MVPs and proof-of-concept builders for startups
• Basic managed service providers
• Help desks and first-line support
• QA testing, web development, and SEO

Conversely, companies offering customized services for specific verticals or complex enterprise needs will be more resilient.

So if you’re planning a long-term exit, ask yourself:

Marcin:
I agree, and I’d add that every IT services company will need to adapt to AI—whether they like it or not.

We’re going to see faster-paced change than we’ve grown used to in what has traditionally been a mature and stable industry. The coming years will likely bring more disruption than the last decade, and it will be fascinating to watch that transformation unfold.

Medium-Term (1–2 Year Horizon)

Filip Drazdou:
Now, zooming into the medium-term—what should companies do if they’re planning to sell within the next year or two?

First, focus on revenue stability and predictability:

• Recurring revenue is highly valued—buyers prefer long-term service contracts over short-term projects.
• A business with limited visibility beyond the next few quarters is much harder to sell.

Second, think about client diversification:

• If one client accounts for 30–50% of your revenue, that’s often a dealbreaker.
• Buyers may either walk away or insist on a discounted valuation or earn-out structure to mitigate the risk.

Third, focus on enterprise clients and vertical specialization:

• Enterprise clients tend to provide more stable and recession-resistant revenue.
• Companies serving startups are seen as riskier due to their dependency on funding cycles.

Finally, specializing in a vertical—like healthcare, life sciences, insurance, or banking—adds value.
Buyers like vertical expertise because it increases your competitive edge and helps you win new clients more easily.

Marcin:
And this is also a powerful response to AI disruption. If your business is just coding behind the scenes, it’s easier for that work to become commoditized.

Instead, companies should focus on building human-to-human relationships and delivering consultative value, especially through vertical expertise.
This kind of positioning is much harder to replicate or replace with AI—and we’ve already seen businesses move in this direction.

It’s the best path to staying relevant and defending your valuation.

Filip Drazdou:
If you’re considering a sale in the next few months to a year, here are some quick wins we suggest:

1. Right-size your team
   • If you still have excess headcount from the pandemic hiring boom, address it now.
   • Buyers expect you to optimize margins—carrying bench staff for too long signals poor management.
   • With the labor market now more flexible, this is easier than it used to be.
2. Know your past and forecast your future
   • Track core KPIs like:
     • Average bill rate
     • Bench utilization
     • Gross margin
   • These are among the first metrics any buyer will ask about. Being prepared builds confidence and shortens due diligence.
3. Build a reliable forecast
   • Ideally, have a 12-month revenue forecast.
   • Base it on contracted clients and pipeline data, using metrics like win rates and cycle times.
   • A data-backed plan shows buyers that you’re running a mature, well-managed business.

The more visibility and realism you bring to the table, the better. Buyers are more likely to present more offers and higher valuations when they see this level of control and insight.

Q&A

Q1: How do valuation multiples vary between different types of IT services businesses?

Filip Drazdou: Different segments definitely receive different valuations. Businesses with enterprise customers, recurring revenue, and involvement in large-scale, strategic projects—like cloud transformation—tend to be valued higher. In contrast, companies focused on staff augmentation or recruitment usually get lower multiples because of the transactional nature of the work and less attractive client dynamics.

Q2: Do you use ARR multiples for SaaS companies?

Marcin: We do. ARR multiples are commonly used in SaaS valuations. We actually covered this topic in detail during our previous webinar dedicated to SaaS, which is available on our website if you’d like to explore it further.

Q3: How do valuations differ between strategic and financial buyers?

Filip Drazdou: Strategic buyers are often willing to pay a bit more, but only if your company fills a very specific gap in their offering—for example, if they want to add Salesforce consulting or ServiceNow services and you fit that niche exactly. On the other hand, financial buyers, like private equity firms, are usually more flexible. They’re building diversified platforms, so while the multiples may be slightly lower, they tend to consider a broader set of businesses.

Q4: Are U.S.-based IT services companies still doing cross-border M&A, especially after tariffs?

Marcin: They are, and arguably even more actively now. IT services haven’t really been affected by tariffs, and the regulatory environment in the U.S. is relatively favorable for M&A. So unless there’s some geopolitical shift around taxing services, cross-border deals should continue.

Filip Drazdou: I’d add that U.S. companies almost have to go abroad. It’s just too expensive to scale using only U.S.-based developers. Most firms we’ve worked with either acquire offshore or set up their own delivery centers internationally.

Q5: Is there a valuation premium for revenue growth, high EBITDA margins, or other characteristics

Marcin: Revenue growth can drive a premium, but it really has to be exceptional—say, 50% annual growth—and consistent. If it’s just a one-off or followed by a decline, it won’t move the needle. Sustained growth at that level, though, can justify as much as a 50% premium on EBITDA multiples.
High EBITDA is always attractive. And certain areas are simply more in demand—anything involving AI, data engineering, Snowflake, Databricks, ServiceNow, or cybersecurity tends to get a premium due to strong buyer interest in those fields.

Filip Drazdou: Exactly. We’re seeing a lot of strategic and financial acquirers specifically looking for companies in those ecosystems, so being aligned with a “hot” vendor or vertical can definitely boost valuation.

Why you need an IT Services M&A advisor

Understanding current IT services valuations provides valuable insights into market trends and helps you time your exit strategy. However, each IT services company is unique, just like every founder’s journey. That’s why it’s important to seek advice from experts in the M&A landscape, particularly advisors with experience in the IT services sector who can understand your situation.

IT services M&A advisors are adept at navigating market dynamics, valuations, and coordinating all essential workstreams. While you focus on running your business, IT services M&A advisors work diligently to ensure that no detail is missed and advocate for the best possible deal. Their success is directly tied to yours, and their impact on the final sale price can be significant.

About Aventis Advisors

Aventis Advisors is an M&A advisor focusing on technology and growth companies. We believe the world would be better off with fewer (but better quality) M&A deals done at the right moment for a company and its owners. Our goal is to provide honest, insight-driven advice, clearly laying out all the options for our clients – including the one to keep the status quo.

Get in touch with us to discuss how much your business could be worth and how the process looks.