The technology services industry is witnessing a resurgence in mergers and acquisitions (M&A) activity, particularly driven by artificial intelligence (AI), engineering projects, and transformation-led deals, according to industry experts. This trend marks a shift after a relatively quiet period for acquisitions in 2023.

Since the start of 2024, several major IT companies have made significant moves. Infosys, India's second-largest IT firm, has been notably active with four acquisitions in the engineering R&D and semiconductor design services sectors. These include two deals announced in April focusing on cybersecurity and energy consulting. Other prominent players like HCLTech and Wipro have each acquired two firms, while LTIMindtree purchased Voicing.AI in December 2023.

Experts anticipate this M&A momentum to continue. Ashutosh Sharma, research director at Forrester Research India, commented, "We expect more and more small AI specialists getting acquired by IT services firms. This is a throwback to digital era when most service providers acquired a number of agencies and digital specialists. This will happen and continue over next 3-5 years." Data from Tracxn indicates that Infosys's most active acquisition year was 2015 with five deals, while Wipro's peak was in 2020 with six. Over the past three years, both Bengaluru-based giants averaged nearly one acquisition annually. In contrast, Tata Consultancy Services (TCS) has not announced any acquisitions since 2020.

Mid-sized IT companies such as Coforge, Persistent Systems, and Happiest Minds Technologies have also been active, each making at least two acquisitions. These acquisitions typically target specialist firms in data, engineering, analytics, and software services, often with embedded AI, transformation, and consulting capabilities.

This increased M&A activity is occurring even as software service providers grapple with subdued demand and an uncertain macroeconomic environment. Analysts suggest that companies with substantial cash reserves are looking to build expertise and scale through inorganic routes, especially given concerns about tariff-led impacts on organic business growth. Prashant Shukla, vice president at Everest Group, noted, "We are in a period where IT majors need to execute on a dual mandate of perform and transform." He added that while conventional wisdom might suggest caution, some firms are leveraging the current climate as an opportunity to acquire assets more affordably for their transformation initiatives.

Furthermore, some experts observe that mid-cap IT companies have demonstrated greater agility and may be preparing for consolidation. Shobhit Jain, MD and head of enterprise, technology & services for investment banking at Avendus Capital, highlighted that mid-cap players are showing a different market outlook compared to their larger counterparts. He also noted that M&A remains a strong theme across the board, with assets generally not trading below a 3x revenue multiple in recent years, and private equity firms are also becoming more aggressive in M&A.

Globally, enterprise tech M&A saw 857 deals in 2024, an increase from 722 in the previous year, with total deal values rising to $32.2 billion, according to consulting firm EY. Wipro's CEO and MD, Srinivas Pallia, affirmed the strategic importance of M&A for the company, stating, "When we have the right opportunity and it falls into our strategic priorities, we go for it. We are constantly looking for an opportunity around that which will help us drive our strategic priority."

Accenture, a global leader, has continued its acquisition strategy, making 11 acquisitions and deploying $500 million since September, including investments in talent and skilling. US-headquartered Cognizant, which has a significant presence in India, also made two acquisitions over the past year to fuel its inorganic growth. In other notable potential deals, Capgemini is reportedly in advanced discussions to acquire BPO specialist WNS, though the companies have not commented on the matter.