M&A in the UK IT services sector: Q4 2025
IT services sector proves resilient
154
deals completed
-3%
Moore Kingston Smith
IT Services Index
73%
deals backed by PE
Our view of the market
2025 was another good year for M&A in the IT services sector. We counted a total of 648 UK deals, which is a 1% increase on 2024’s 641 completed transactions. Given that many other industry sectors experienced a decline in M&A activity, particularly in the final quarter of the year, the fact that the UK’s IT services industry proved so resilient is encouraging.
We counted 154 completed transactions in Q4 2025, a 2% increase on the 151 deals we recorded in Q3. While this is only a small increase, it is in stark contrast to other UK industry sectors, some of which experienced significant declines in the number of deals completing in Q4.
The UK’s late Budget caused uncertainty but the Chancellor did announce some sector-specific investments to encourage growth – although the cut to the CGT relief available to shareholders selling to an EOT has made this exit route less attractive. Acquirers and sellers who were in a wait-and-see mode can now plan for transactions with more confidence.
The outlook for 2026 is unclear but we remain hopeful of an improving environment for would-be sellers and acquirers. The UK’s economic outlook is currently characterised by cautious optimism for modest short-term growth. Inflation is predicted to keep falling, and economists expect the Bank of England to announce further rate cuts in the coming months, which will help leveraged transactions. In addition, the increased rates of business asset disposal relief, which will apply from April 2026, may well encourage business owners to complete transactions during the first quarter of the year.
If IT services M&A continues apace, even when general market conditions are uncertain, we can expect an improving environment in 2026 to lead to significant increases in transaction levels. Our data shows M&A activity in the UK IT services sector going from strength to strength, indicating that acquirers and investors are targeting this space, and the opportunities for growth that it affords, at the expense of others.
Annual deal volume
Quarterly deal volume
“The IT services sector demonstrated exceptional M&A resilience in 2025, outperforming a broad range of industries. Although acquirers are navigating volatile macroeconomic conditions with care, their appetite for the sector remains strong, supported by compelling investment opportunities.”
Nick Thompson, Corporate Finance Partner
Spotlight on: Cloud services
Cloud services deals accounted for 33% of all the Q4 transactions we recorded in the data and security space, which is a significant increase on the 17% in Q3. The UK cloud services market is a rapidly growing sector, characterised by a high rate of business adoption, a government “cloud first” policy and a strong push towards hybrid and multi-cloud strategies. Managing and optimising cloud spend has become a top priority for businesses.
One notable UK cloud services deal in Q4 was the acquisition of Bankside Systems by Fargo Group. Bankside is the creator of a cloud-native terminal operating system that helps freight terminals and hubs run their container, equipment and yard operations more efficiently. Fargo Group, which supplies technology for the global freight industry, was backed by August Equity in 2024.
Also in the cloud services space, in November, Pets4Homes announced it had acquired a UK-developed mobile application, Breedera, which helps responsible dog breeders stay organised and compliant with UK legislation.
Q4 deals by sector
“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: Software development
Software development deals made up 69% of all the Q4 transactions in the IT consulting space, up from 66% in Q3. The software development market is experiencing significant growth driven by pervasive digitisation across all industries, fuelled by AI, cloud computing and IoT applications. Even with AI automating some tasks, this shifts the needs of businesses towards higher-level problem-solving, security and integration, increasing demand for specialised software to manage complex systems and data.
The biggest UK deal in this space in Q4 was the October completion of the acquisition of London-headquartered OSTTRA, which provides post-trade solutions for the global OTC market, by PE powerhouse KKR for $3.1 billion. OSTTRA was established in 2021 as a joint venture between financial data provider S&P Global and derivatives marketplace CME.
At the other end of the scale, in November, Octopus Energy announced it had snapped up Kuppa, a UK smart home-energy software start-up, whose software allows customers to assess their home’s energy upgrade potential in seconds rather than days or weeks.
Matthew Edwards, Corporate Finance Manager
Private equity (PE)
Of the 154 transactions in Q4, 73% involved PE investment, either directly or via an existing portfolio company. This is lower than the 78% in Q3 but still very high. Looking at the year as a whole, we find that PE-backed investments accounted for 73% of the 648 deals in 2025. This is considerably higher than the 70% in 2024, 64% in 2023 and 67% in 2022.
The UK PE market was boosted by a series of interest rate cuts in 2025, making leveraged transactions more affordable than they were for a couple of years. Economists expect further rate cuts in 2026, lending more power to the leveraged buyers. Despite a more constrained fundraising environment, PE still has significant dry powder to invest in the UK. Consequently, we expect to see increased activity by PE-backed buyers as market conditions improve.
Percentage of PE-backed deals
In December, PE behemoth Blackstone backed its investee company Dutch payments group Mollie in its planned acquisition of UK-based bank payment processor GoCardless. Financial terms of the deal were not released but market commentators expected GoCardless to be valued at c. $1.5 billion. GoCardless has a suite of private equity investors, including Permira, BlackRock, Accel and Balderton.
“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 December, NASDAQ-listed, London-headquartered, AI-driven, online commerce specialist, Rezolve AI, announced it had acquired US-based digital experience business, Crownpeak for an initial purchase price of $90 million, plus the assumption of approximately $150 million of Crownpeak’s debt.
In December, AIM-listed, Bedford enterprise software company Netcall, reported it had acquired Leicester-based digital experience specialist, Jadu, in a deal valued at up to £19.2 million.
In October, Microsoft technology partner, Transparity, which is backed by PE house Bowmark Capital, acquired Xpedition, a specialist in Microsoft Dynamics.
Stock market performance
Global stock markets showed some reasonable gains in Q4, with the S&P 500 up by 2%. However, IT stocks were out of favour with investors, as fears over possibly frothy valuations continued. As a result, the Moore Kingston Smith IT Services Index underperformed the market, ending Q4 down by 3%. This was slightly worse than the performance of one of our technology-specific indices, the FTSE TechMark Focus Index, which fell by 2%. Meanwhile, the MSCI World Information Technology Index fared slightly better, ending Q4 up 1%.
We lost one company from the Moore Kingston Smith IT Services Index, with the delisting of Spirent Communications from the LSE after it had been acquired by US-based Keysight Technologies in an all-cash deal that valued Spirent at approximately £1.16 billion. Of the 19 companies remaining in the index, more than half ended the quarter in negative territory, with just nine seeing their share prices rise.
Q4’s star performer was Cognizant, which saw its share price increase by 25%. At the end of October, Cognizant reported third-quarter revenues ahead of market expectations, which helped to boost its share price. However, what really fuelled a sharp upward trajectory was Cognizant’s announcement in mid-November that it was to acquire Microsoft Azure services provider and AI-enablement solutions specialist 3Cloud, which was founded by former Microsoft executives.
Our worst performer in Q3, Xerox, retained its position at the bottom of the pile, with its share price losing 39% of its value in Q4. In November, it released a disappointing quarterly report and a significantly reduced full-year forecast – the second time that it had revised its 2025 guidance downwards, citing further weakness in print equipment demand due to macroeconomic factors and US government funding uncertainties delaying orders. What particularly alarmed analysts was the company’s forecast reduction in free cash flow. As a result, S&P Global said it believed that there were increased risks about Xerox’s ability to refinance its 2028 and 2029 debt maturities, and lowered its credit rating to CCC+, essentially saying the company is in financial distress.
Moore Kingston Smith IT Services Index
Q4 2025 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.
