While much of the investment market is focused on the investment opportunities surrounding Artificial Intelligence (AI), areas such as data mining, and data analytics are also attracting “premium valuations” when professional services companies providing those services are sold, according to Ben Doltis, founding partner at PCB Partners, a mergers and acquisitions advisory firm which specialises in the technology area.
Technology as an investment opportunity fell somewhat from favour in 2022 as a consequence of higher interest rates, which reduce the nominal value of long duration assets.
He said these areas are attracting interest because, “some firms have the clients and the scale, but the people, so they are buying firms to access the people. And then you have it the other way around, some firms have the people, but haven’t yet reached scale, so they buy other firms to get their clients.”
Among the red flags he feels investors look out for are traditional financial metrics such as EBIT (earnings before interest and tax) and gross margin.
Doltis said the other factor investors consider when looking at these companies is whether there is too much reliance on a small number of clients , or if there is concern that staff will leave if there is a change of ownership.
david.thorpe@ft.com
