Top and mid-sized Indian IT services and software-as-a-service companies are scouting for companies generating between $20 million and $60 million in annual revenue in the US, the UK and Western Europe to build their data analytics and AI capabilities, people familiar with the matter told Mint.
Transactions in the $100 million-200 million valuation range are also under way, experts said.
Datatonic, a cloud data and (AI) consultancy based in London, is considering a stake sale and has attracted interest from international companies including top Indian IT services firms, two people said.
“The company is exploring both a minority and majority stake sale,” said one person. The discussions remain preliminary, with the contours of the potential deal still being worked out.
Singapore-based platform-as-a-service firm Mystifly has received interest in a deal likely to value it at over $100 million, two other people familiar with the matter said.
“There is significant interest from international firms alongside a few domestic tech companies that have expressed intent for the tech stack built by the company,” one person said.
Discussions are ongoing and no final decision has been made in both potential transactions, the people said.
Queries sent to Datatonic and Mystifly on Sunday did not elicit a response until publication.
A handful of other boutique, specialist firms are exploring M&A opportunities, but their names could not be immediately verified by Mint.
“We are seeing a clear pick-up in outbound M&A by , and the thesis has shifted decisively toward data, AI and engineering,” said Sonia Dasgupta, managing director and chief executive officer for investment banking at JM Financial Ltd.
The interest comes amid a broader wave of buyouts in the technology services sector. Tata Consultancy Services struck its largest-ever acquisition in December by buying Coastal Cloud for $700 million. completed its acquisition of Optimum Healthcare IT for up to $465 million in May.
Indian IT services companies want to supplement organic growth with acquisitions that provide access to new clients, specialist talent and capabilities in data engineering, analytics and AI. Buying established businesses overseas can strengthen their consulting capabilities and help them compete for larger contracts as macroeconomic uncertainty, AI-led disruptions and geopolitical overhangs weigh on discretionary spending and decision-making.
“Buyers are looking at acquisitions more as a means to get new capabilities and new clients. AI and analytics are key focus areas,” said Abhishek, partner – TMT deals industry leader at PwC India. He doesn’t use a second name.
Companies are looking to gain new accounts, niche or premium capabilities, access to global capability centres and greater market penetration, Abhishek said. The US remains a key focus market for AI and analytics assets. However, quality assets continue to remain a challenge.
“We expect to see such deals pick up over the next two to four quarters,” Abhishek added.
The M&A flow is not limited to Indian companies buying overseas assets.
“Global buyers are also showing interest in India-based delivery scale, data and AI-led operations platforms and domain expertise,” Dasgupta said.
For both outbound and inbound investments, healthcare, banking, financial services and insurance, data and cybersecurity are expected to continue commanding valuation premiums, she added.
“We are seeing sustained M&A activity across technology services, particularly in data engineering, analytics, cloud and cybersecurity,” said Shivani Nagpaul, partner, investment banking – technology at EY India. “However, the market is operating at two speeds.”
Well-capitalized strategic buyers are pursuing larger transactions to gain scale, marquee client relationships and access to transformation budgets. At the same time, a broader set of smaller acquisitions is focused on specialist capabilities across the US, the UK and Europe, she said.
The consolidation is partly a response to structurally slower organic growth and the changing nature of enterprise technology spending.
“M&A is increasingly about buying a seat at the table for large, multi-year AI and digital-transformation programmes rather than simply adding technology capabilities, delivery footprint or revenue,” Nagpaul added.
Despite the appetite for acquisitions, buyers are more selective about pricing, growth quality and the sustainability of business models.
AI capabilities alone are no longer sufficient to command premium valuations. Buyers place greater emphasis on commercial traction, strong enterprise relationships and business models that can generate growth beyond traditional headcount-led delivery, Nagpaul said.
JM Financial’s Dasgupta, however, said transaction multiples continue to reflect demand for assets and the growth in their core markets, rather than potential AI-led disruption.
While AI-related concerns may have affected the timing in some deals in the near term, she does not expect them to materially affect transaction multiples.
