M&A in the UK IT services sector: Q1 2026
UK deal activity on the increase
164
deals completed
-20%
Moore Kingston Smith
IT Services Index
66%
deals backed by PE
Our view of the market
2025 was a good year for M&A activity in the UK’s IT services sector, with a higher number of deals completing than in 2024. The market has continued to grow in early 2026. A total of 164 deals were completed in Q1, which is a 6% increase on the 154 transactions we recorded in Q4 2025.
In our previous report, we expressed optimism that conditions would become more favourable for prospective sellers and buyers in 2026. Investor confidence strengthened towards the end of 2025, supported by a more positive outlook for the UK economy and expectations of further interest rate reductions. This renewed optimism prompted acquirers to rebuild their deal pipelines during the final quarter of 2025, which helped drive an increase in completed transactions in the first quarter of 2026.
Quarterly deal volume
That said, recent military action in the Middle East has introduced a new layer of uncertainty. The extent and duration of the conflict could have significant repercussions for both global and UK economies. The Bank of England has already suggested that further interest rate cuts are now less likely, while short-term inflation is expected to rise due to the disrupted energy supply routes increasing fuel, utility and operating costs.
Against this backdrop, it remains uncertain whether acquirers will sustain the level of M&A activity seen in Q1, or if dealmaking will slow as the market waits for greater clarity on how the situation unfolds.
“We are encouraged by the robust M&A activity in the first quarter and remain optimistic about the rest of the year, despite the global political challenges that could impact the UK economy in the near term.”
Nick Thompson, Corporate Finance Partner
Spotlight on: IT managed services
IT managed services deals made up 32% of all the Q1 transactions we recorded in the outsourcing and distribution space. In today’s highly competitive IT environment, clients expect managed services providers (MSPs) to deliver a broad spectrum of services, from cyber security to cloud management and more advanced solutions. By adopting a buy-and-build approach and acquiring specialist firms, MSPs rapidly broaden their capabilities without the time and cost required to develop them internally. This allows them to better meet client needs while also enhancing their ability to win new business.
We saw a number of acquirers continuing to pursue their buy-and-build strategies in the UK market in Q1. In February, Dynamic Networks Group acquired 5th Utility, which provides IT consultancy, infrastructure solutions, data security, support services and bespoke IT solutions to SMEs and schools. This marks Dynamic Networks Group’s third strategic acquisition to strengthen its managed IT services offering.
Also in February, LDC-backed business communications and IT services business Onecom announced the acquisition of Matrix IT, a Microsoft Solutions Partner providing professional IT services across the south of the UK. The acquisition marks Onecom’s 14th since LDC first invested £100 million in the firm in 2019.
“In an uncertain macro environment, UK cloud services businesses stand out for their resilience, scalability, and embedded role in customers’ operations.”
Matt McRae, Corporate Finance Director
Trending: Cloud services
Cloud services deals accounted for 35% of all the Q1 transactions we recorded in the data and security space, continuing the trend of increasing interest by acquirers that we started seeing at the end of last year. The UK cloud services market is expanding quickly, driven by widespread adoption among businesses, a government cloud-first approach and an increasing shift toward hybrid and multi-cloud environments. As a result, controlling and optimising cloud spending has become a key focus for organisations.
In February, Moore Kingston Smith advised leading data and technology solutions company CACI on its acquisition of Datalynx, which provides highly secure data and cloud migration services within complex and sensitive environments. This marks the fifth strategic acquisition that Moore Kingston Smith has advised CACI on.
Matthew Edwards, Corporate Finance Manager
Private equity (PE)
Of the 164 UK IT services transactions we recorded in Q1, 66% involved PE investment, either directly or via an existing portfolio company. While this still accounts for two-thirds of the market, this is a significantly lower percentage than we saw throughout last year, and is the lowest we have recorded since Q4 2023.
The UK PE market was boosted by a series of interest rate cuts in 2025, and activity in the first quarter of this year was underpinned by anticipated further cuts. However, due to the situation in the Middle East, it remains to be seen whether PE houses, particularly those reliant on leverage, scale back their activity further in the coming months.
Percentage of PE-backed deals
The IT services sector benefits from scalable business models that support fast growth and efficient operations, making it highly attractive to private equity investors seeking rapid value creation. In the UK, a fragmented market further encourages consolidation, with PE-backed firms pursuing buy-and-build strategies to scale, gain market share and unlock synergies. This approach accelerates growth and enhances exit appeal, ensuring consolidation remains a key trend in the sector.
In February, Five Arrows (the alternative assets arm of Rothschild & Co) and Deutsche Beteiligungs completed the acquisition of Totalmobile, UK-based field management software provider, from UK PE house Bowmark Capital. The deal was reported to be worth in excess of $500 million.
“PE houses are playing the long game here, and not letting the current volatile environment stop them from acquiring high-quality UK IT services businesses at a reasonable price from their perspective.”
Nick Thompson, Corporate Finance Partner
Notable UK mid-market deals
In January, SmartSearch, a digital compliance service provider backed by Triple Private Equity, announced it had completed the acquisition of its rival anti-money laundering specialist Credas Technologies. The deal, which was initially agreed in October 2025 but required regulatory approval to complete, was reported to have been for c. £78 million.
Also in January, Hansen Technologies, which is listed on the Australian Securities Exchange, completed its acquisition of UK-based mobile virtual network operator Digitalk for a purchase price of £33.1 million.
In March, Manchester-based bank integration solutions provider announced it had sold a majority stake to Accel-KKR, a global PE house specialising in enterprise technology and software companies. The deal for the Manchester fintech realised first backed the business in 2018.
Stock market performance
Global stock markets started the year in bullish form but fell in March due to the commencement of military action in the Middle East. The markets have been extremely volatile, with large intra-day swings as investors react to announcements relating to the expected duration of the conflict and resulting disruption to supply chains. The S&P 500 ended Q1 down 5%. The Moore Kingston Smith IT Services Index finished Q1 down by 20%, considerably behind the general market.
It was also well behind the performance of our two technology-specific indices: the FTSE TechMark Focus index, which delivered flat performance; and the MSCI World Information Technology index, which ended Q1 down 9%. Of the 19 companies in the Moore Kingston Smith IT Services Index, almost all ended the quarter in negative territory, with just two seeing their share prices rise.
IT stocks have been out of favour with investors since the start of the year, as valuations of software-as-a-service (SaaS) companies in particular have experienced significant downward pressure, driven primarily by the rapid advancement of AI and its potential to disrupt traditional business models.
Our top performer, Computacenter, posted a modest but nevertheless peer-beating 2% increase in its share price. Its shares rose by more than 10% in one day in late January, after it lifted its profit guidance for the full financial year. Its final results, published in March, were in line with that guidance but its shares fell back as investors digested the company’s cautious outlook amid macroeconomic uncertainty.
Our worst performer in Q4 2025, Xerox, had another sorry quarter in Q1 2026, with its share price sliding by a further 48%. Xerox shares are trading at all-time lows, and the stock has lost approximately 87% of its value since the start of 2025. The continued decline in its share price was not helped by the company announcing a surprise adjusted loss in January, missing analysts’ consensus forecasts.
While headline revenues for the group grew 26% in Q4 2025, primarily due to its acquisition of Lexmark, pro forma revenue declined by 9%, indicating that the organic core business is still shrinking.
Moore Kingston Smith IT Services Index
Q1 2026 sector subcategories
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Methodology
In compiling our deal tracker we use Pitchbook, an international financial data provider that gives access to comprehensive data on the private and public markets. We analyse every deal with either a UK buyer or UK seller or both. Where the target company is classified as IT consulting, outsourcing and distribution, or data and security, the transaction is entered into the deal tracker.
