M&A Activity in IT Services: Key Trends in 2025 Shaping the Industry’s Future
By Puneet Maheshwari
Mergers and acquisitions in the IT services sector are reshaping industry dynamics both globally and in India. At Merisis Advisors, we expect M&A activity in this space to accelerate in the coming year. Several key trends are fueling this growth, trends that have already played a significant role in recent deals. Below, we highlight the top five M&A trends to watch in 2025.
- Verticalization: Expertise leading to high optimization
A key M&A trend in IT services for 2024 is verticalization, where firms focus on acquiring companies specializing in industries. This approach gives an opportunity for legacy players with deep industry expertise to find a bigger home, even if they lag in their capabilities enhancement. Clients value providers who understand industry-specific challenges and regulations, fostering stronger relationships and higher-value contracts with a high level of interest in BFSI, Healthcare, Pharma and Semicon in particular. This trend is also picking well in the Analytics and BPO space as well.
For instance, L&T Tech Services’ acquisition of Intelliswift & Persistent Systems acquiring SoHo Dragon’s assets to enhance their BFSI offerings. NTT DATA’s majority stake in ProvenTech and Zensar’s acquisition of BridgeView Life Sciences to expand its HLS practice. Verticalization not only enhances client value but also enables firms to capture greater market share in targeted sectors, offering lower go-to-market costs and long-term stickiness through expertise developed over time.
- Balancing act of Scale vs. Scope
Scale vs. Scope debate remains a defining factor in M&A trends within IT services. Until recently, there has been an ongoing consolidation to scale up across various segments, particularly with hyperscalers like Salesforce and ServiceNow which are still in demand but for a different reason (spoiler – Scope) and with a different audience. While, scaling with a focus on acquiring companies to strengthen existing capabilities, enhancing cross-selling potential, improving margins, and reducing client acquisition costs. On the other hand, scope seeks to expand topline growth by diversifying service offerings or entering new geographic markets to fill up any voids.
According to Nasscom’s report in 2024, 61% of the M&A activity in IT services is driven by the need to strengthen capabilities. For instance, Aurionpro’s acquisition of Arya.ai enhances AI adoption and fintech offerings while Accenture’s acquisition of Cientra expands its silicon design and custom engineering capabilities. While there’s always are balancing between both scale and scope for the blue-chip buyers, the mid-size challengers are prioritizing capabilities over topline.
- Geo Diversification: International inorganic and local organic growth
Internationalization with cross-border M&A is not new to IT services, but these bets are also quite strategic with nearshoring as one of the key reasons and market entry in segments with high entry barriers like DACH-based auto clients. While global expansion remains a key focus, domestic acquisitions continue to attract firms aiming to consolidate leadership in established markets, secure new clients, or enhance regional service offerings. For instance, Infosys acquired Danske IT, enhancing its presence in the Middle East, and in-tech, a German engineering R&D services provider for the automotive sector.
Diversification with International acquisitions enables companies to mitigate risks tied to over-reliance on single markets, given current geo-political overhang, and tap into higher-paying regions. IT giants increasingly seeking targets beyond developed western nations in emerging markets like Southeast Asia, Latin America, and Africa to bolster their footprint for strategic reasons. At the same time, some Indian firms focus on acquiring smaller regional companies to strengthen their domestic footprint. One of EPAM’s recent examples is of EPAM expanding its reach in Latin America with the acquisition of Vates.
On the flipside, amid slower demand in traditional markets like NAM and Europe, Indian IT exporters are increasingly targeting regions like APAC, the Middle East, and Africa. These emerging markets present growth opportunities in digital transformation, cloud adoption, and government-led technology initiatives. Companies such as Infosys, TCS, and HCL are investing in localized solutions and regional partnerships to capitalize on this demand.
- Changing DNA? From Services to Products.
To strengthen their foothold in emerging technologies, major IT firms such as Accenture, Infosys, and IBM are strategically acquiring Indian startups specializing in AI, semiconductors, and analytics. This trend reflects a pivot from traditional service models to product-driven offerings, aiming to deliver integrated, end-to-end solutions aligned with digital transformation and cloud adoption demands.
Recent examples include IBM’s acquisition of Prescinto, a SaaS provider for renewable energy APM, and Infosys’s investment in spacetech firm GalaxEye. Additionally, Wipro’s stake in Aggne and SDVerse, and HCLTech’s planned acquisition of Zeenea, underline efforts to integrate advanced cloud, data, and governance capabilities, positioning IT firms for future growth amid evolving tech landscapes.
- Adoption of AI, Cloud, and Cybersecurity
Gen-AI is reshaping IT services in 2024, driving innovation across automation, personalized solutions, and cybersecurity. With McKinsey estimating Gen-AI’s annual economic impact at $4.4 trillion, its potential to transform industries like software development, customer support, and operations is undeniable. IT firms are leveraging AI for tasks like code generation, where tools such as GitHub Copilot enhance developer productivity by 55%, and for real-time client engagement through chatbots, cutting response times by 90%.
Industry leaders, including Infosys and Wipro, are adopting Gen-AI to modernize legacy systems and shift to agile, digital-first frameworks, creating intellectual property and reducing costs. Meanwhile, investments in AI startups—like Cyient’s stake in Azimuth AI and LTIMindtree’s $6 million Voicing.AI deal—reflect a broader push toward unified communications and predictive solutions. By aligning with Gen-AI trends, IT service providers are not only streamlining operations but also defining the future of scalable, high-value services in an increasingly digital economy.
Conclusion
The IT services industry is undergoing a rapid transformation, with mergers and acquisitions playing a pivotal role in driving growth and innovation through 2024 and 2025. Companies are capitalizing on trends like vertical integration, geo-diversification, and the rise of emerging technologies—especially artificial intelligence, cloud computing, and cybersecurity—to reshape their business models for sustained success. This shift towards product-driven solutions, combined with a strategic balance of scale and scope, is helping firms enhance client value, streamline operations, and expand into new markets. In our advisory work, we’ve seen numerous clients and companies embrace these forward-thinking strategies, positioning themselves as key players in global digital transformation and economic progress.
(This article is Authored by Puneet Maheshwari and Sumir Verma from Merisis Advisors – India’s largest mid-market investment banking advisory firm with $1Bn of total transaction value across fundraise, M&A and secondaries, and the views expressed in this article are his own).
